Safety-Net Hospitals Finding Ways To Offset Quality Penalties, AHRQ Study Suggests

Safety-net hospitals being penalized by Medicare value-based payment programs have found ways to offset those losses, but those methods may be volatile and temporary, an AHRQ study has found. Researchers examined the financial impacts of the Hospital Readmissions Reduction Program and the Value-Based Purchasing Program, which in 2013 began to financially penalize hospitals that failed to meet certain standards on hospital readmissions and other measures of quality. The analysis showed penalties were higher for safety net hospitals, which treat a large proportion of low-income patients. However, unlike other hospitals, safety-net hospitals appear to have offset higher penalties with revenues such as charitable contributions and government funding. Researchers cautioned that these funding streams may fail to compensate for losses over time. Access the abstract of the article, which was published in Health Services Research.

2018 Feb 8. doi: 10.1111/1475-6773.12833. [Epub ahead of print]

Medicare Payment Penalties and Safety Net Hospital Profitability: Minimal Impact on These Vulnerable Hospitals.

Bazzoli GJ1, Thompson MP2, Waters TM3.

Author information

Abstract

OBJECTIVE:

To examine relationships between penalties assessed by Medicare's Hospital Readmission Reduction Program and Value-Based Purchasing Program and hospital financial condition.

DATA SOURCES/STUDY SETTING:

Centers for Medicare and Medicaid Services, American Hospital Association, and Area Health Resource File data for 4,824 hospital-year observations.

STUDY DESIGN:

Bivariate and multivariate analysis of pooled cross-sectional data.

PRINCIPAL FINDINGS:

Safety net hospitals have significantly higher HRRP/VBP penalties, but, unlike nonsafety net hospitals, increases in their penalty rate did not significantly affect their total margins.

CONCLUSIONS:

Safety net hospitals appear to rely on nonpatient care revenues to offset higher penalties for the years studied. While reassuring, these funding streams are volatile and may not be able to compensate for cumulative losses over time.