	Background

The HVBP program affects Medicare payments to approximately 3,000  acute care hospitals for the inpatient services provided to Medicare  beneficiaries. The percentage increases added back are  based on a hospital’s performance on each quality measure included in  the HVBP payment formula. Most Hospitals Received Bonuses or Penalties of Less than Half of One Percent Each Year, with Generally Similar Results for Small and Safety Net Hospitals

Most hospitals received a bonus or penalty from the HVBP program of  less than 0.5 percent of applicable Medicare payments in each of the first  three years of the program. Small  rural and small urban hospitals had similar or better results than hospitals  overall. 2.) Compared to Hospitals Overall, Safety Net Hospitals Received Lower Payment Adjustments and Small Urban Hospitals Received Higher Payment Adjustments

Safety net hospitals consistently had lower median payment  adjustments—that is, smaller bonuses or larger penalties—than hospitals  overall. In contrast, small urban hospitals had higher median payment  adjustments—that is, larger bonuses or smaller penalties—than hospitals  overall during the program’s first three years. No Shift in Trends Was Apparent for the HVBP’s Quality Measures in the Program’s Initial Years, but Such Shifts Could Emerge Over Time As the Program Implements Planned Changes

While the HVBP program aims to provide an incentive to improve  hospitals’ quality of care, preliminary analysis of information from 2013  and 2014—the two years of quality measure results after the program’s  implementation that were available at the time of our analysis—shows  that it did not noticeably alter the existing trends in hospitals’ performance  on any of the quality measures used to determine HVBP payment  adjustments that we examined. 3.) Second, the HVBP program has  evolved substantially over time and will continue to do so, and therefore  its effects on quality may also be different. Quality Measures Not Included in the HVBP Program Also Showed No Apparent Shift in Trends During the Same Initial Years, Except for Readmissions

Most of the IQR quality measures we examined that were not included in  the HVBP program had trends that were similar to those in the program. Nonetheless, the conjunction of the drop in hospital readmission rates  and the introduction of a financial incentive program targeting those rates  provides some additional indication that financial incentives of the sort  broadly offered by programs like the HVBP program and the Hospital  Readmissions Reduction program may, under certain circumstances,  promote enhanced quality of care. However, a clear understanding of the  extent of that impact, and the circumstances under which it may be  maximized, will depend on the results of future research. Hospital Officials Reported That the HVBP Program Helped Reinforce Ongoing Quality Improvement Efforts but Did Not Lead to Major Changes

Officials from selected hospitals reported that the HVBP program  reinforced their ongoing quality improvement programs without leading to  major changes. Hospital officials pointed  in particular to the outcome measures in the HVBP program as  influencing efforts to expand their hospitals’ ongoing quality improvement  efforts beyond the traditional focus on clinical process measures. A Variety of Factors Affected Selected Hospitals’ Capacity to Make Quality Improvements, Which Were Not Directly Affected by the HVBP Program

The issue that officials from most of the selected hospitals we contacted  frequently identified as a barrier to quality improvement efforts was the  hospital’s information technology (IT) system, especially its electronic  health record. Others said that their IT  systems helped them to better manage their quality performance efforts,  such as through built-in clinical process reminders in their electronic  health record systems or by facilitating the collection of the patient clinical  data needed for quality measures. Agency Comments

We provided a draft of this report to the Department of Health and Human  Services for review, which includes CMS. The department provided  technical comments, which we incorporated as appropriate. Appendix II: Quality Measures Included in the Hospital Value-based Purchasing Program, Fiscal Years 2013 through 2017

	Measure Included in Fiscal Year

Description  Heart attack patients received fibrinolytic  agent within 30 minutes of hospital arrival  Heart attack patients received percutaneous  coronary intervention within 90 minutes of  hospital arrival  Heart failure patients received discharge  instructions  Blood culture performed in the emergency  department prior to first antibiotic received in  hospital for pneumonia patients  Appropriate initial antibiotic selection for  community acquired pneumonia patient  Prophylactic antibiotic received within 1 hour  prior to surgical incision  Received prophylactic antibiotic consistent  with recommendations for surgical patients  Prophylactic antibiotics discontinued within  24 hours after surgery end time (48 hours for  cardiac surgery)

	Patient Experience

	Measure Included in Fiscal Year

	Efficiency

Appendix III: Median Hospital Value-based Purchasing Payment Adjustments by Bed Size, Fiscal Years 2013 through 2015

Appendix IV: Median Hospital Value-based Purchasing Payment Adjustments by Net Income, Fiscal Years 2013 through 2015

Appendix V: Median Hospital Value-based Purchasing Domain Scores by Hospital Type, Fiscal Years 2013 through 2015

Appendix VI: Bonuses and Penalties under Hospital Value-based Purchasing by Hospital Type, Fiscal Years 2013 through 2015

Appendix VII: GAO Contact and Staff Acknowledgments

	GAO Contact:

	Staff Acknowledgments:

In addition to the contact named above, Will Simerl, Assistant   Director; Zhi Boon; Krister Friday; Colbie Holderness; Eric Peterson;   David Plocher; Vikki Porter, and Steve Robblee made key contributions   to this report.
Why GAO Did This Study

The HVBP program, which the Centers for Medicare & Medicaid Services (CMS) administers, annually evaluates individual hospital performance on a designated set of quality measures related to inpatient hospital services and, based on those results, adjusts Medicare payments to hospitals in the form of bonuses and penalties. The HVBP program was enacted in 2010 as part of the Patient Protection and Affordable Care Act (PPACA). The first HVBP payment adjustments occurred in fiscal year 2013.
PPACA included a provision for GAO to assess the HVBP program's impact on Medicare quality and expenditures, including the HVBP program's effects on small rural, small urban, and safety net hospitals. This report evaluates the initial effects of the HVBP program on: (1) Medicare payments to hospitals, (2) quality of care provided by hospitals, and (3) selected hospitals' quality improvement efforts. To determine these initial effects of the HVBP program, GAO analyzed CMS data on bonuses and penalties given to hospitals in fiscal years 2013 through 2015 as well as data on hospital quality measures collected by CMS from 2005 through 2014, the most recent year available. GAO also interviewed officials with eight hospitals that participated in the HVBP program. Hospitals were selected to include safety net, small urban, and small rural hospitals, as well as those that were not part of any of these subgroups.
The Department of Health and Human Services, which includes CMS, reviewed a draft of this report and provided technical comments, which GAO incorporated as appropriate.

What GAO Found

The bonuses and penalties received by most of the approximately 3,000 hospitals eligible for the Hospital Value-based Purchasing (HVBP) program amounted to less than 0.5 percent of applicable Medicare payments each year. GAO found that safety net hospitals, which provide a significant amount of care to the poor, consistently had lower median payment adjustments—that is, smaller bonuses or larger penalties—than hospitals overall in the program's first three years. However, this gap narrowed over time. In contrast, small urban hospitals had higher median payment adjustments each year than hospitals overall, and small rural hospitals' median payment adjustments were similar to hospitals overall in the first two years and higher in the most recent year.
GAO's analysis found no apparent shift in existing trends in hospitals' performance on the quality measures included in the HVBP program during the program's initial years. However, shifts in quality trends could emerge in the future as the HVBP program continues to evolve. For example, new quality measures will be added, and the weight placed on clinical process measures—on which hospitals had little room for improvement—will be substantially reduced. For many quality measures not included in the HVBP program, GAO also found that trends in hospitals' performance remained unchanged in the period GAO reviewed, but there were exceptions in the case of three measures that are part of a separate incentive program targeting hospital readmissions. This program focuses exclusively on readmissions and imposes only penalties. The timing of changes in readmission trends provides some indication that the use of financial incentives in quality improvement programs may, under certain circumstances, promote enhanced quality of care. However, understanding the extent of that impact depends on the results of future research.
Officials from selected hospitals GAO interviewed reported that the HVBP program generally reinforced ongoing quality improvement efforts, but did not lead to major changes in focus. In addition, hospital officials cited a variety of factors that affected their capacity to improve quality. For example, officials from most hospitals GAO contacted reported challenges related to using information technology (IT) systems—including electronic health records—to make quality improvements. In contrast, other hospital officials said their IT systems aided their quality performance efforts, such as by helping to collect clinical data needed to track progress on quality measures. Hospital officials described such factors as affecting their hospital's quality improvement efforts as a whole, rather than being specifically linked to implementation of the HVBP program.