Value Based Puchasing and Safety Net Hospitals

One of the mainstays of our current health care reform dialogue is promoting efficiency. The US health care system gets pretty good outcomes for its clients, but it comes at a great cost and with a lack of equity. Regarding cost, there has been a push to pay providers (doctors, clinics, hospitals, etc) for the quality of the services they render, not just for having rendered the service. Along these lines, with the new health care reform bill, Medicare will start paying hospitals based on performance as measured by the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS). This is what is referred to as Value Based Purchasing (VBP).

En face, it sounds like a great idea. But are there potential downsides to VBP? An elegant new study by Paula Chatterjee and colleagues suggests that the answer might be yes. Paula, et al, look at how safety net hospitals, a group of providers that disproptionately take care of poor, vulnerable patients have performed on HCAHPS surveys, showing that these hospitals typically have fared work on the patient satisfaction aspect of this index. Strikingly, safety net hospitalis were 60% less likely to be at or above the median on a variety of patient experience measures when compared to other hospitals. Because the median is the key metric upon which the Medicare VBP algorithms are based, safety net hospitals will potentially stand to lose key Medicare dollars. As they are financially constrained as it is, this could potentially lead to a negative feedback loop, where safety net hospitals lack the funds to make the improvements necessary to perform better on VBP, thereby losing more funds, and so on.

This example highlights a few key points that are relevant for health care reform anywhere. First, certain kinds of incentives will create, or exacerbate existing, tradeoffs between making the system more equitable versus more efficient. In this case, the push for efficiency may potentially reduce available care options for the poor, which leads to worsening equity. Note that this could even lead to worsened efficiency, if the lack of immediate care for the poor leads to increased downstream costs (eg, more ED visits, or longer hospitalizations when an earlier, less costly, hospitalization would have done). Second, better designed incentives may actually help move to an equilibrium where this tradeoff is minimized. For example, a VBP system which allows safety net hospitals lead time in figuring out best practices (perhaps via learning from each other, or via some explicit "curriculum" or forum created by Medicare) may help them improve quality -which will certainly be equitable given their population- and stay solvent.

Ultimately, I think key for payment reform, which should be the explicit goal for Medicare and other health programs, is to perform the reachable alchemy of improving both equity and efficiency. I say "reachable" for a reason: everyone is aware that other OECD countries spend less and gain the same or more when it comes to health. At least on a less fundamental level (i.e, payment reform within our mish-mosh private system), we can aim to do the same.