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So Many Hospitals, So Little Information: How Hospital Value‐Based Purchasing Is a Game of Chance
Author(s) -
Friedson Andrew I.,
Horrace William C.,
Marier Allison F.
Publication year - 2019
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12375
Subject(s) - purchasing , value based purchasing , reimbursement , payment , actuarial science , point (geometry) , quality (philosophy) , business , plan (archaeology) , metric (unit) , operations management , marketing , health care , economics , finance , mathematics , philosophy , geometry , archaeology , epistemology , history , economic growth
As part of the Patient Protection and Affordable Care Act, participating hospitals have part of their Medicare reimbursements withheld and then redistributed based on quality performance. The Hospital Value‐Based Purchasing reimbursement plan relies partly on ordinal rankings of hospitals to determine how money is distributed. We analyze the quality metric score distributions that underlie payment redistribution and show that there is not enough information to reliably differentiate hospitals from one another near the program point cutoffs, and conclude that a large part of the payment formula is driven by sampling variability rather than true quality information. An alternative plan for rewarding hospitals is developed.