Unbiased Analysis of Today's Healthcare Issues

Does tying payment to quality improve quality?

Written By: Jason Shafrin - Nov• 16•15

Although the typical economist answer would be yes, in the case of one Medicare Advantage program, the answer is ‘no’.

A paper by Layton and Ryan (2015) [earlier draft] examine the Medicare Advantage Quality Bonus Payment Demonstration (MA QBP) which began in 2012.  In this program:

…plans receive bonus payments based on an overall plan quality rating calculated from a set of clinical quality measures and patient satisfaction ratings. These bonuses are quite large, ranging from 3-10% of plan payments, much larger than the 1-2% of revenue typically at risk in hospital and provider group P4P contracts.

Although their differences-in-differences  (DiD) approach found that quality improved in counties where plans were eligible fore the larger bonus compared to those that were not, bonus counties already had a positive trend towards quality improvement prior to the start of MA QBP, which may invalidate the parallel trends assumption required by the DiD framework. Instead, the authors use a regression discontinuity and propensity score design and find “…a precisely estimated zero effect of bonus size on quality, suggesting that larger bonuses have no effect on health plan quality.”

Why is the reason for this lack of improvement.  The authors give two explanations.  One is that quality improvement has high fixed cost (e.g., training staff) or that effective investment is necessarily “lumpy”, it may not be worth it for plans to invest in high-cost quality improvement efforts.  Second, plans may face short term constraints.  For instance, plans may find it difficult to shift their existing physician network to a a higher quality network, particularly if the current provider network has a multi-year contract.

Regardless of the cause, tying reimbursement to quality by itself may not be enough to move the needle on patient quality of care.

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