Association of Postdischarge Spending and Performance on New Episode-Based Spending Measure

The Centers for Medicare & Medicaid Services (CMS) is incentivizing hospitals to provide high-quality, low-cost care.¹ As part of these efforts, CMS recently added the Medicare Spending per Beneficiary (MSPB) metric to its Hospital Value-Based Purchasing (HVBP) program, marking the first time that most US hospitals have received financial penalties or rewards based on their performance on a risk-adjusted, price-standardized 30-day episode-based measure of Medicare spending along with quality measures. The factors that influence or determine hospital performance in this metric have not yet been thoroughly investigated. We evaluated whether hospital performance was driven by spending before, during, or after hospitalization.

We determined hospital performance on the MSPB measure in fiscal year (FY) 2014 and 2015, using publicly available data on CMS’s Hospital Compare.² The MSPB metric is based on all price-standardized, risk-adjusted Medicare Part A and Part B payments for episodes of care from 3 days prior to admission through 30 days after discharge.³ The metric is not condition-specific, because admissions for all fee-for-service Medicare beneficiaries are included. In 2015, hospital performance on the MSPB, which accounts for 20% of the overall HVBP score, along with performance in the 3 quality domains that account for the remaining 80% (patient experience of care, clinical process of care, and outcomes), determine whether a hospital will receive a penalty or bonus totaling up to 1.5% of all Medicare payments.⁴

We classified hospitals by their MSPB performance, using CMS’s method for assigning domain scores. Low-cost hospitals are those with MSPB scores that are equal to or lower than the benchmark, defined as the mean of hospital scores in the first decile. Medium-cost hospitals have MSPB scores greater than the benchmark and less than or equal to the 50th percentile. High-cost hospitals have MSPB scores that are greater than the 50th percentile.³ Across these spending categories, we compare MSPB scores and price-standardized payments for 3 components of an episode (preadmission, index admission, and postdischarge care) by 7 sources of spending (inpatient, outpatient, skilled nursing facility [SNF], durable medical equipment, carrier, home health agency, and hospice). We also describe changes in hospital performance across the 2 years. We performed 2-sample t tests to evaluate the differences between high- and low-cost hospitals as well as hospitals that got better or worse. This study was declared exempt by the University of Michigan institutional review board.

Among 3194 hospitals in HVBP in 2015, preadmission, index admission, and postdischarge spending made up 3%, 53%, and 44% of average total episode spending of $18 247. The SNF and readmission payments accounted for 38% and 30% of postdischarge payments, respectively.

A total of 135 hospitals (4%) were low-cost hospitals in 2015, 1630 (51%) were medium cost, and 1429 (45%) were high cost (Table). Patients admitted to high-cost hospitals spent an average of $7385 more than patients in low-cost hospitals ($19 908 vs $12 523; P < .001). This difference was driven primarily by payments for postdischarge care. Patients at high-cost hospitals spent an average of $4691 more on postdischarge care than those at low-cost hospitals ($9287 vs $4596; P < .001). In contrast, patients at high-cost hospitals spent only $2450 more on the index admission ($10 006 vs $7556; P < .001). Changes in hospitals’ MSPB performance over time were also driven largely by changes in postdischarge payments (Figure). On average, hospitals whose performance on MSPB got worse, determined by changes in classification (low, medium, or high cost) from FY 2014 to FY 2015, spent $1238 more on postdischarge care, whereas hospitals whose performance improved spent $297 less on postdischarge care (P < .001).

Compared with low-cost hospitals, high-cost hospitals had significantly higher preadmission and index admission spending, but the largest differences were in postdischarge spending. The CMS effort to hold hospitals financially accountable for readmissions is not new, but holding hospitals accountable for spending on other types of postdischarge care is a departure from past practice.⁵ Our findings suggest that hospitals that can reduce postdischarge spending will perform well on CMS’ new spending measure.

Corresponding Author: Anup Das, BA, School of Public Health, Department of Health Management and Policy, University of Michigan, 1415 Washington Heights, Room M3331, Building II, Ann Arbor, MI 48109 (anupdas@umich.edu).

Published Online: November 23, 2015. doi:10.1001/jamainternmed.2015.6261.

Author Contributions: Mr Das had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.

Study concept and design: All authors.

Acquisition, analysis, or interpretation of data: All authors.

Drafting of the manuscript: Das.

Critical revision of the manuscript for important intellectual content: All authors.

Statistical analysis: Das, Norton, Chen.

Obtained funding: Chen.

Administrative, technical, or material support: Das, Miller.

Study supervision: Norton, Chen.

Conflict of Interest Disclosures: None reported.

Funding/Support: This work was supported by the National Institute on Aging (grant No. P01AG019783). Mr Das is supported by the National Institute of Diabetes and Digestive and Kidney Diseases of the National Institutes of Health under Award No. F30DK105749. Dr Chen is supported by K08HS020671 from the Agency for Healthcare Research and Quality (AHRQ). She also reports receiving funding from a contract with Blue Cross Blue Shield of Michigan for serving as co-director of the Michigan Value Collaborative. Dr Norton reports receiving funding from Blue Cross Blue Shield of Michigan. This work was also supported by the Blue Cross Blue Shield of Michigan Foundation’s Frank J. McDevitt Excellence in Research Award for Health Services, Policy & Clinical Care, and the University of Michigan’s MCubed Program. Dr Miller reports receiving funding from the National Cancer Institute (R01-CA-174768A1) and from contracts with Blue Cross Blue Shield of Michigan for serving as director of the Michigan Value Collaborative and the Michigan Urological Surgery Improvement Collaborative.

Role of the Funder/Sponsor: The funding sources had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.

Additional Contributions: We are grateful to Ellen Meara, PhD, the Dartmouth Institute, and Jonathan Skinner, PhD, the Dartmouth Institute, for their comments on an earlier version of this manuscript.