	Background

Each year, CMS evaluates approximately 3,000 acute care hospitals  participating in HVBP on their performance in prior years on a series of  quality and efficiency measures. Beginning in fiscal year 2013, the HVBP program provided new bonuses  and penalties that were based on each hospital’s performance on a  subset of these measures. CMS determines each hospital’s payment adjustment based on the  hospital’s total performance score relative to all participating hospitals. 1.) Quality Scores Were Generally Lower for Safety Net Hospitals Compared to All Hospitals, while Small Rural and Urban Hospitals Generally Had Higher Quality and Efficiency Scores

Safety net hospitals generally had lower median quality domain scores in  comparison to all hospitals, while small rural and small urban hospitals  generally scored higher on quality and efficiency domains during fiscal  years 2013 through 2017. 2). 3). HVBP Payment Adjustments Have Varied over Time, but Safety Net Hospitals Generally Had Lower Payment Adjustments Compared to the Other Hospital Types

Median payment adjustments generally have varied for all hospitals, and  small rural and small urban hospitals, since the program began; however,  in most years, the median payment adjustment for safety net hospitals  has been a penalty—that is, a negative payment adjustment. The majority of all hospitals received a bonus or a penalty of less than 0.5  percent each year of the program (see fig. An increasing percentage  of hospitals have also received penalties of greater than 0.5 percent over  time, and safety net hospitals consistently had the highest percentage of  penalties of 0.5 percent or more when compared to all hospitals, small  rural hospitals, and small urban hospitals. Since Fiscal Year 2015, High Efficiency Scores Have Resulted in Bonuses for Some Lower Quality Hospitals

		About 20 Percent of All Hospitals Receiving Bonuses Had Composite Quality Scores below the Median and Received Bonuses Because of High Efficiency Scores

Since the efficiency score was added to the HVBP program in fiscal year  2015, about 20 percent of the hospitals that received bonuses each year  had weighted composite quality scores below the median for all hospitals  in fiscal years 2015 through 2017 (see table 4). We also found that hospitals with missing domain scores were more likely  to receive a bonus than hospitals with all domain scores. As a result, hospitals with missing domain scores  are more likely to get a bonus, and, in some cases, those bonuses are  greater than median bonuses overall. Conclusions

The aim of the HVBP program is to improve hospital quality and efficiency  by providing incentives for hospitals to improve their quality of care and to  become more cost efficient. Recommendations for Executive Action

To ensure that the HVBP program accomplishes its goal to balance  quality and efficiency and to ensure that it minimizes the payment of  bonuses to hospitals with lower quality scores, we recommend that the  Administrator of CMS take the following two actions:
Revise the formula for the calculation of hospitals’ total performance  score or take other actions so that the efficiency score does not have  a disproportionate effect on the total performance score. Appendix I: Quality and Efficiency Measures in the Hospital Value-based Purchasing Program, Fiscal Years 2013 through 2017

Table 7 lists the Inpatient Quality Reporting program measures that the  Centers for Medicare & Medicaid Services (CMS) used to analyze  hospitals’ performance in the Hospital Value-based Purchasing program  during fiscal years 2013 through 2017.
Why GAO Did This Study

The HVBP program, enacted as part of the Patient Protection and Affordable Care Act (PPACA), evaluates hospital performance on quality and efficiency (Medicare spending per beneficiary) measures. Based on those results, CMS adjusts Medicare payments, leading to bonuses or penalties for hospitals. The first HVBP payment adjustments started in fiscal year 2013.
PPACA included a provision for GAO to assess the HVBP program's impact on Medicare quality and efficiency, including the effects on safety net, small rural, and small urban hospitals. This report addresses (1) hospitals' performance in quality and efficiency categories; (2) how hospitals' payment adjustments have changed over time; and (3) the effect, if any, of efficiency scores on payment adjustments.
GAO analyzed CMS documentation and data on performance scores and payment adjustments in each year for all hospitals participating in fiscal years 2013 through 2017. GAO also analyzed results for safety net, small rural, and small urban hospitals and interviewed CMS officials.

What GAO Found

The Hospital Value-based Purchasing (HVBP) program aims to improve quality of care and efficiency by creating financial incentives for about 3,000 participating hospitals. From fiscal years 2013 through 2017, performance on quality and efficiency measures varied by hospital type. Safety net hospitals—those that serve a high proportion of low-income patients—generally scored lower in quality compared to all participating hospitals. In contrast, small rural and small urban hospitals—those with 100 or fewer acute care beds—scored higher on efficiency compared to all hospitals.
Payment adjustments—bonuses or penalties, announced prior to each fiscal year—have varied over time for all hospitals. In four out of the five years of GAO's analysis, small rural and small urban hospitals were more likely to receive a bonus compared to all participating hospitals, while safety net hospitals were more likely to receive a penalty. While a majority of all hospitals received a bonus or a penalty of less than 0.5 percent each year, the percentage of hospitals receiving a bonus greater than 0.5 percent increased from 4 percent to 29 percent from fiscal year 2013 to 2017. In dollar terms, most hospitals had a bonus or penalty of less than $100,000 in fiscal year 2017.
Some hospitals with high efficiency scores received bonuses, despite having relatively low quality scores, which contradicts the Centers for Medicare & Medicaid Service's (CMS) stated intention to reward hospitals providing high-quality care at a lower cost. Further, among hospitals that were missing one or more quality scores, the efficiency score had a greater effect on the total performance score because of the methodology used by CMS. This methodology compensated for the missing scores by increasing the weights of all of the non-missing scores. Consequently, hospitals with missing scores were more likely to receive bonuses than hospitals with complete scores.
Bonus or Penalty Status of Hospitals Participating in the Hospital Value-based Purchasing Program, Fiscal Years 2015 through 2017

What GAO Recommends

So that lower quality hospitals do not receive bonuses, GAO recommends that CMS revise (1) the methodology used to calculate total performance scores and (2) its method of accounting for missing quality scores. In its written comments, HHS indicated that it would consider revising these two methodologies.