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Report on Hospital Purchasing Programs Shows Little Progress

The Government Accountability Office’s recent 49-page interim report on value-based purchasing programs shows that hospital performance on quality measures was improving before the purchasing program was instituted and has not noticeably changed during its first two years. The report found no apparent shifts in hospital performance trends on quality measures from fiscal years 2013-15.

The program, part of the Affordable Care Act, was created to reward hospitals for quality care. It was designed to move healthcare delivery away from payment for volume to one that pays for value and quality care for inpatients.

Most of the approximately 3,000 hospitals eligible for the program received a bonus or penalty of less than 0.5% of their Medicare payments in each of the program’s first three years. Seventy-four percent of hospitals inside the range at the end of the fiscal year ending Sept. 30 had a $39,000 median bonus and a $56,000 median penalty.

Outliers of the payments and penalties only serve to point out some trends that need to be addressed. A recent article in JAMA Internal Medicine found that relying on the current risk-adjustment characteristics of age, sex, and diagnosis put safety-net hospitals in line for significant financial penalties due to higher readmission rates. Safety-net hospitals, serving the poor and patients with chronic conditions, had smaller bonuses and larger penalties.

Bottom line? The program has failed to demonstrate improvements in care.


  • The October 2015 GAO report “Hospital Value-based Purchasing” is free here.
  • More information on the report from CMS can be found here.
  • See Patient Characteristics and Differences in Hospital Readmission Rates, Michael l. Barnett, MD, John Hsu MD, MBA, MSCE, J. Michael McWilliams, MD, PhD, JAMA Intern Med. 2015; doi: 10.1001/jamainternmed.2015.4660.