Unbiased Analysis of Today's Healthcare Issues

Hospital VBP gains the attention of the New York Times

Written By: Jason Shafrin - May• 31•11

The Healthcare Economist has already commented on the impending Medicare implementation of a hospital value-based purchased (VBP) system.  Now, Medicare’s hospital VBP program has garnered the attention of the popular press.  According to the New York Times:

The administration plans to establish ‘Medicare spending per beneficiary’ as a new measure of hospital performance…Hospitals could be held accountable not only for the cost of the care they provide, but also for the cost of services performed by doctors and other health care providers in the 90 days after a Medicare patient leaves the hospital…

In calculating Medicare spending per beneficiary, the administration said, it wants to count costs generated during a hospital stay, the three days before it and the 90 days afterward. This, it said, will encourage hospitals to coordinate care “in an efficient manner over an extended time period…

Medicare will begin computing performance scores in July, for monetary rewards and penalties that start in October 2012.

Do hospitals like the plan? Some do, but many do not.

This plan has drawn fire from hospitals, which say they have little control over services provided after a patient’s discharge — and, in many cases, do not even know about them…Without opposing the change, lawmakers from higher-cost states like Massachusetts and New York say the payment formula needs more work…Kenneth E. Raske, president of the Greater New York Hospital Association, said the formula ‘tends to discriminate against inner-city hospitals with large numbers of immigrant, poor and uninsured patients.’

By contrast, J. Kirk Norris, president of the Iowa Hospital Association, welcomed the new plan. ‘Medicare ought to pay for value,’ he said.

Will Medicare adequately risk adjust provider payments? Can hospitals coordinate post-acute care once their patients leave the hospital? Will additional coordination lead to increased industry consolidation and–in the long-run–increased health care cost? Will hospitals be able to game the system? How will Medicare monitor quality?

I have discussed these issues in series of previous posts on value-based purchasing. Hopefully, Medicare will get it right this time and improve quality while reducing cost. At this point, however, with Medicare Trust Fund set to be exhausted in 2024, reducing cost may be the priority which trumps all others.

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