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Insights and Trends

Quality Clinical Outcomes Vital to Value-Based Care: Part 1

As healthcare continues to evolves, payers and policymakers are rapidly moving toward value-based arrangements. Many acute care hospitals have begun to implement strategies aimed at ensuring quality outcomes in order to earn an incentive payment from CMS, which began withholding a percentage of the hospitals’ base operating Medicare payments as part of the program in 2012.


This is the first in a two-part series breaking down everything you need to know about quality clinical outcomes and the move to value-based care.  

Hospital Value-Based Purchasing (VBP): Based on the hospital’s achievement and improvement scores on certain quality measures – including patient experience scores, mortality rates and payment efficiencies – the hospital is able to earn back an incentive payment.  

While the Centers for Medicare and Medicaid Services (CMS) reports that participating hospitals are showing “modest improvement,” the New England Journal of Medicine has found that for value-based purchasing hospitals, there was a “nonsignificant increase in the clinical process composite score, a nonsignificant reduction in the patient satisfaction score, and no difference in mortality for acute myocardial infarction and heart failure, compared to control hospitals.”1 Approximately 1,600 hospitals out of 3,000 received Medicare bonuses in 2017, leaving about 1,300 hospitals receiving a negative payment adjustment.

Hospital Readmissions Reduction Program (HRRP): Under HRRP, CMS withholds up to three percent of regular reimbursements for hospitals if they have a higher-than-expected number of readmissions within 30 days of discharge for six conditions:

  • Chronic lung disease
  • Coronary artery bypass graft surgery
  • Heart attacks
  • Heart failure
  • Hip and knee replacements
  • Pneumonia

Studies have confirmed that the HRRP has been successful in preventing beneficiary harm and relieving taxpayer burden. The Medicare Payment Advisory Commission (MedPAC) found that between 2010 and 2016, readmission rates fell by 3.6 percentage points for heart attack, 3.0 percentage points for heart failure, and 2.3 percentage points for pneumonia, compared with an average decline of 1.7 percentage points across all other conditions not covered by the policy. Despite the success of the program, in 2018 more than 2,500 hospitals had reduced Medicare reimbursements – about 80% of hospitals in the program. This reflects a slight improvement from 2017.

This is the current state of affairs as our healthcare landscape transitions, with the expected growing pains. What can be done to improve hospitals’ performance and their success in earning those incentive payments? What role do post-acute providers play in improving performance? We will continue to see experimentation with different initiatives as hospitals strive for financial stability and improvement, and most importantly, the quality outcomes that drive those things. The second part of this two-part blog series will examine the critical component of patient experience and how it is integrated.


1Rebecca Berger, MD and Muhammad Sohaib Qamar, MD (2017) Is There Value in Hospital Value-Based Purchasing? 

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