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The Early Effects of Medicare's Mandatory Hospital Pay-for-Performance Program

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Keywords: Pay-for-performance; hospitals; econometrics; health services research

Objective: To evaluate the impact of hospital value-based purchasing (HVBP) on clinical quality and patient experience during its initial implementation period (July 2011–March 2012).

Data Sources: Hospital-level clinical quality and patient experience data from Hospital Compare from up to 5 years before and three quarters after HVBP was initiated.

Study Design: Acute care hospitals were exposed to HVBP by mandate while critical access hospitals and hospitals located in Maryland were not exposed. We performed a difference-in-differences analysis, comparing performance on 12 incentivized clinical process and 8 incentivized patient experience measures between hospitals exposed to the program and a matched comparison group of nonexposed hospitals. We also evaluated whether hospitals that were ultimately exposed to HVBP may have anticipated the program by improving quality in advance of its introduction.

Principal Findings: Difference-in-differences estimates indicated that hospitals that were exposed to HVBP did not show greater improvement for either the clinical process or patient experience measures during the program's first implementation period. Estimates from our preferred specification showed that HVBP was associated with a 0.51 percentage point reduction in composite quality for the clinical process measures (p > .10, 95 percent CI: −1.37, 0.34) and a 0.30 percentage point reduction in composite quality for the patient experience measures (p > .10, 95 percent CI: −0.79, 0.19). We found some evidence that hospitals improved performance on clinical process measures prior to the start of HVBP, but no evidence of this phenomenon for the patient experience measures.

Conclusions: The timing of the financial incentives in HVBP was not associated with improved quality of care. It is unclear whether improvement for the clinical process measures prior to the start of HVBP was driven by the expectation of the program or was the result of other factors.

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