Hospital response to value reforms from the Affordable Care Act
Medicare recently initiated two major pay-for-performance programs for hospitals -- the Hospital Value-Based Purchasing (HVBP) program, and the Hospital Readmissions Reduction Program (HRRP). These programs affect the reimbursements to acute care hospitals participating in the Inpatient Payment Prospective Systems. HVBP is the first national pay-for-performance (P4P) program in the United States. The Hospital Readmissions Reduction Program (HRRP) incentivizes acute care hospitals to decrease their preventable readmissions. Together, these P4P programs provide strong incentives for hospitals to improve both quality of care and lower episode costs. If successful, these programs will profoundly change how hospitals make decisions with respect to quality and cost. This session explores three different aspects of this important policy using recent data. The first paper studies whether HVBP has improved quality of care, the primary outcome of interest. The second paper estimates the marginal effect of an individual patient on the various measures, and tests whether hospitals focus their quality improvement efforts in areas with the highest potential payoff. The third paper explores how well heterogeneity in hospital characteristics and hospital performance in the program explain hospital-level changes in readmission rates. Together, this research provides an important first exploration into the incentives and effectiveness of Medicare’s P4P programs under the Affordable Care Act.