Impact of performance-based budgeting on quality outcomes in U.S. military health care facilities.

BACKGROUND: Performance-based budgeting (PBB) is a variation of pay for performance that has been used in government hospitals but could be applicable to any integrated system. It works by increasing or decreasing funding based on preestablished performance thresholds, which incentivizes organizations to improve performance. In late 2006, the U.S. Army implemented a PBB program that tied hospital-level funding decisions to performance on key cost and quality-related metrics. PURPOSE: The aim of this study was to estimate the impact of PBB on quality improvement in U.S. Army health care facilities. APPROACH: This study used a retrospective difference-in-differences analysis of data from two Defense Health Agency data repositories. The merged data set encompassed administrative, demographic, and performance information about 428 military health care facilities. Facility-level performance data on quality indicators were compared between 187 Army PBB facilities and a comparison group of 241 non-PBB Navy and Air Force facilities before and after program implementation. RESULTS: The Army's PBB programs had a positive impact on quality performance. Relative to comparison facilities, facilities that participated in PBB programs increased performance for over half of the indicators under investigation. Furthermore, performance was either sustained or continued to improve over 5 years for five of the six performance indicators examined long term. CONCLUSION: Study findings indicate that PBB may be an effective policy mechanism for improving facility-level performance on quality indicators. PRACTICE IMPLICATIONS: This study adds to the extant literature on pay for performance by examining the specific case of PBB. It demonstrates that quality performance can be influenced internally through centralized budgeting processes. Though specific to military hospitals, the findings might have applicability to other public and private sector hospitals who wish to incentivize performance internally in their organizational subunits through centralized budgeting processes.

Hospital risk-based payments and physician employment: Impact on financial performance.

BACKGROUND: Hospital involvement in risk-based payment and employment of physicians can have a large impact on their profitability. Risk-based reimbursement approaches with third-party payers and provider-sponsored insurance products hold hospital organizations financially accountable for a range of patient services. Direct employment of physicians can add new revenue sources for the hospital but comes at the high cost of physician compensation packages. PURPOSE: Risk bearing and physician employment have multifaceted effects on hospital profitability. The objective of this study is to assess overall financial implications of these arrangements. METHODOLOGY: Fixed-effects estimation with American Hospital Association, Centers for Medicare & Medicaid Services, and Area Health Resource File data are used for the period 2012-2015. Key measures include indicators of hospital involvement in risk-based payments and the number of employed physicians by specialty. Hospital and market factors that could affect profitability are controlled in the analysis. RESULTS: Increases in employed hospitalists for hospitals with risk-based payment arrangements had a beneficial effect on their profitability. No significant association existed between profits and increased physician employment for hospitals lacking such payment arrangements and for increased nonhospitalist physician employment in hospitals with these arrangements. CONCLUSIONS: Hospitals that hold some degree of financial responsibility for patient care have learned how to deploy employed hospitalists to their financial advantage. The unique role of hospitalists in expediting and coordinating patient care may yield the cost control that hospitals need to succeed under risk-based payment arrangements. PRACTICE IMPLICATIONS: Hospitals are still on a learning curve in determining how to structure incentives for their nonhospitalist employed physicians. To the extent that employment of these nonhospitalist physicians has not yet had a detrimental effect on hospital profits, a window of opportunity exists for hospitals to develop enhanced approaches to align primary care and specialist physicians to achieve financial aims.

A taxonomy of hospitals participating in Medicare accountable care organizations.

BACKGROUND: Medicare was an early innovator of accountable care organizations (ACOs), establishing the Medicare Shared Savings Program (MSSP) and Pioneer programs in 2012-2013. Existing research has documented that ACOs bring together an array of health providers with hospitals serving as important participants. PURPOSE: Hospitals vary markedly in their service structure and organizational capabilities, and thus, one would expect hospital ACO participants to vary in these regards. Our research identifies hospital subgroups that share certain capabilities and competencies. Such research, in conjunction with existing ACO research, provides deeper understanding of the structure and operation of these organizations. Given that Medicare was an initiator of the ACO concept, our findings provide a baseline to track the evolution of ACO hospitals over time. METHODOLOGY/APPROACH: Hierarchical clustering methods are used in separate analyses of MSSP and Pioneer ACO hospitals. Hospitals participating in ACOs with 2012-2013 start dates are identified through multiple sources. Study data come from the Centers for Medicare and Medicaid Services, American Hospital Association, and Health Information and Management Systems Society. RESULTS: Five-cluster solutions were developed separately for the MSSP and Pioneer hospital samples. Both the MSSP and Pioneer taxonomies had several clusters with high levels of health information technology capabilities. Also distinct clusters with strong physician linkages were present. We examined Pioneer ACO hospitals that subsequently left the program and found that they commonly had low levels of ambulatory care services or health information technology. CONCLUSION: Distinct subgroups of hospitals exist in both the MSSP and Pioneer programs, suggesting that individual hospitals serve different roles within an ACO. Health information technology and physician linkages appear to be particularly important features in ACO hospitals. PRACTICE IMPLICATIONS: ACOs need to consider not only geographic and service mix when selecting hospital participants but also their vertical integration features and management competencies.

Factors associated with hospital participation in Centers for Medicare and Medicaid Services' Accountable Care Organization programs.

BACKGROUND: In 2012, the Centers for Medicare and Medicaid Services (CMS) initiated the Medicare Shared Savings Program (MSSP) and Pioneer Accountable Care Organization (ACO) programs. Organizations in the MSSP model shared cost savings they generated with CMS, and those in the Pioneer program shared both savings and losses. It is largely unknown what hospital and environmental characteristics are associated with the development of CMS ACOs with one- or two-sided risk models. PURPOSE: The aim of this study was to assess the organizational and environmental characteristics associated with hospital participation in the MSSP and Pioneer ACOs. METHODOLOGY: Hospitals participating in CMS ACO programs were identified using primary and secondary data. The ACO hospital sample was linked with the American Hospital Association, Health Information and Management System Society, and other data sets. Multinomial probit models were estimated that distinguished organizational and environmental factors associated with hospital participation in the MSSP and Pioneer ACOs. RESULTS: Hospital participation in both CMS ACO programs was associated with prior experience with risk-based payments and care management programs, advanced health information technology, and location in higher-income and more competitive areas. Whereas various health system types were associated with hospital participation in the MSSP, centralized health systems, higher numbers of physicians in tightly integrated physician-organizational arrangements, and location in areas with greater supply of primary care physicians were associated with Pioneer ACOs. Favorable hospital characteristics were, in the aggregate, more important than favorable environmental factors for MSSP participation. CONCLUSION: MSSP ACOs may look for broader organizational capabilities from participating hospitals that may be reflective of a wide range of providers participating in diverse markets. Pioneer ACOs may rely on specific hospital and environmental characteristics to achieve quality and spending targets set for two-sided contracts. PRACTICE IMPLICATIONS: Hospital and ACO leaders can use our results to identify hospitals with certain characteristics favorable to their participation in either one- or two-sided ACOs.

The Impact of Integrated Case Management on Health Services Use and Spending Among Nonelderly Adult Medicaid Enrollees.

BACKGROUND: Medicaid plans, whose patients often have complex medical, social, and behavioral needs, seek tools to effectively manage enrollees and improve access to quality care while containing costs. OBJECTIVES: The aim of this study is to examine the effects of an integrated case management (ICM) program operated by a Medicaid managed care plan on health service use and spending for nonelderly, nonpregnant adults. RESEARCH DESIGN: We estimate the relationship between intensity of ICM program involvement and changes in utilization and spending for patients who participated in ICM. We examine whether effects differ between high-risk and lower-risk individuals and between the early and late stages of the program, given that the latter relied on more targeted and patient-centered approaches. Specifically, we estimate linear regressions modeling changes in utilization and spending outcomes as a function of number of program contacts, conditional on number of days over which contacts occurred, as well as individual-level covariates and case manager fixed effects. RESULTS: In the late ICM program period, we observe significant decreases in outpatient utilization associated with program involvement intensity among high-risk ICM participants. We also observe decreases in spending associated with program involvement intensity among the lower-risk group in the late period, although there is no significant impact on spending among high-risk enrollees. CONCLUSIONS: ICM can be a successful strategy for impacting health services use and spending. Our findings suggest that careful program targeting, well-structured client engagement, and direct one-on-one contact are vitally important for achieving program objectives.

Delivery system characteristics and their association with quality and costs of care: implications for accountable care organizations.

BACKGROUND: Implementation of accountable care organizations (ACOs) is currently underway, but there is limited empirical evidence on the merits of the ACO model. PURPOSE: The aim was to study the associations between delivery system characteristics and ACO competencies, including centralization strategies to manage organizations, hospital integration with physicians and outpatient facilities, health information technology, infrastructure to monitor community health and report quality, and risk-adjusted 30-day all-cause mortality and case-mixed-adjusted inpatient costs for the Medicare population. METHODOLOGY: Panel data (2006-2009) were assembled from Florida and multiple sources: inpatient hospital discharge, vital statistics, the American Hospital Association, the Healthcare Information and Management Systems Society, and other databases. We applied a panel study design, controlling for hospital and market characteristics. PRINCIPAL FINDINGS: Hospitals that were in centralized health systems or became more centralized over the study period had significantly larger reductions in mortality compared with hospitals that remained freestanding. Surprisingly, tightly integrated hospital-physician arrangements were associated with increased mortality; as such, hospitals may wish to proceed cautiously when developing specific types of alignment with local physician organizations. We observed no statistically significant differences in the growth rate of costs across hospitals in any of the health systems studied relative to freestanding hospitals. Although we observed quality improvement in some organizational types, these outcome improvements were not coupled with the additional desired objective of lower cost growth. This implies that additional changes not present during our study period, potentially changes in provider payment approaches, are essential for achieving the ACO objectives of higher quality of care at lower costs. PRACTICE IMPLICATIONS: Provider organizations implementing ACOs should consider centralizing service delivery as a viable strategy to improve quality of care, although the strategy did not result in lower cost growth.

Did budget cuts in Medicaid disproportionate share hospital payment affect hospital quality of care?

BACKGROUND: Medicaid Disproportionate Share Hospital (DSH) payments are one of the major sources of financial support for hospitals providing care to low-income patients. However, Medicaid DSH payments will be redirected from hospitals to subsidize individual health insurance purchase through US national health reform. OBJECTIVES: The purpose of this study is to examine the association between Medicaid DSH payment reductions and nursing-sensitive and birth-related quality of care among Medicaid/uninsured and privately insured patients. METHODS: Economic theory of hospital behavior was used as a conceptual framework, and longitudinal data for California hospitals from 1996 to 2003 were examined. Hospital-fixed effects regression models were estimated. The unit of analysis is at the hospital level, examining 2 aggregated measures based on the payer category of discharged patients (ie, Medicaid/uninsured and privately insured). PRINCIPAL FINDINGS: The overall study findings provide at best weak evidence of an association between net Medicaid DSH payments and hospital quality of care for either Medicaid/uninsured or the privately insured patients. The magnitudes of the effects are small and only a few have significant DSH effects. CONCLUSIONS: Although this study does not find evidence suggesting that reducing Medicaid DSH payments had a strong negative impact on hospital quality of care for Medicaid/uninsured or privately insured patients, the results are not necessarily predictive of the impact national health care reform will have. Research is necessary to monitor hospital quality of care as this reform is implemented.

Changes in the health care safety net 1992-2003: disparities in access for uninsured persons in Florida.

A patchwork of services is available to uninsured in the United States through the health care safety net. During 1996-2003, some safety net hospitals (SNHs) closed or converted their ownership status from public or non-profit to for-profit. Meanwhile, the number of community health centers (CHCs) grew as a result of new federal funding. This article examines the impact of these two countervailing events on access to care for the uninsured. Hospital admissions for ambulatory care sensitive conditions relative to marker conditions were used as our access measure. We examined 35,730 discharges for uninsured adults treated in Florida hospitals in the years 1992 or 2003. A generalized estimating equation model was used to assess differential access effects for racial and ethnic groups. We found that in communities with CHC openings but no SNH contractions, uninsured black and white individuals experienced deteriorations in access over time, but the Hispanic uninsured did not. However, in communities where SNHs closed or converted, access deteriorations occurred for all three racial and ethnic groups. Thus, the potentially beneficial effects of CHC expansions on access to primary care for the uninsured Hispanic population in Florida appeared to be offset if contractions in the hospital safety net were present.

Medicaid Disproportionate Share Hospital payment: how does it impact hospitals' provision of uncompensated care?

This study examines the association between hospital uncompensated care and reductions in Medicaid Disproportionate Share Hospital (DSH) payments resulting from the 1997 Balanced Budget Act. We used data on California hospitals from 1996 to 2003 and employed two-stage least squares with a first-differencing model to control for potential feedback effects. Our findings suggest that nonprofit hospitals did reduce provision of uncompensated care in response to reductions in Medicaid DSH, but the response was inelastic in value. Policymakers need to continue to monitor uncompensated care as sources of support for indigent care change with the Patient Protection and Affordable Care Act (ACA).

Is quality of cardiac hospital care a public or private good?

BACKGROUND: There are many studies examining the effects of financial pressure from different payment sources on hospital quality of care, but most have assumed that quality of care is a public good in that payment changes from one payer will affect all hospital patients rather than just those directly associated with the payer. Although quality of hospital care can be either a public or private good, few studies have tested which of these scenarios are more likely to hold. OBJECTIVES: To examine whether the change in the magnitude of in-hospital mortality for Medicare and managed care patients is different based on financial pressure resulting from the Balanced Budget Act and growing managed care market penetration; and to examine what role hospital competition may play in affecting these changes. DATA AND METHODS: The unit of analysis for the study was the hospital. Multiple data sources were used including the Agency for Healthcare Research and Quality State Inpatient Databases, American Hospital Association Annual Surveys, Area Resource File, and health maintenance organization data from InterStudy. A difference-in-difference-in-difference model was applied for a 2-period panel design. RESULTS: In general, Balanced Budget Act financial pressure and managed care market share did not magnify the difference in in-hospital mortality rates between Medicare and managed care patients. The results suggest that quality of cardiac care in the hospital setting is more likely to be a public good; however, more investigation using other quality indicators and the role of hospital competition under different payment systems is recommended.

Community benefit activities of private, nonprofit hospitals.

The definition of hospital community benefits has been intensely debated for many years. Recently, consensus has developed about one group of activities being central to community benefits because of its focus on care for the poor and on needed community services for which any payments received are low relative to costs. Disagreements continue, however, about the treatment of bad debt expense and Medicare shortfalls. A recent revision of the Internal Revenue Service's Form 990 Schedule H, which is required of all nonprofit hospitals, highlights the agreed-on set of activities but does not dismiss the disputed items. Our study is the first to apply definitions used in the new IRS form to assess how conclusions about the adequacy of nonprofit hospital community benefits could be affected if bad debt expenses and Medicare shortfalls are included or excluded. Specifically, we examine 2005 financial data for California and Florida hospitals. Overall, we find that conclusions about community benefit adequacy are very different depending on which definition of community benefits is used. We provide thoughts on new directions for the current policy debate about the treatment of bad debts and Medicare shortfalls in light of these findings.

Impacts of market and organizational characteristics on hospital efficiency and uncompensated care.

BACKGROUND: Hospitals have confronted a difficult financial environment given many factors, including expansion of managed care, changes in public policy, growing market competition for certain services, and growth in the number of uninsured. Policy makers have expressed concern that hospitals may forgo providing care to the indigent as a means to reduce costs and become more efficient when faced with financial pressures. PURPOSE: This article examined the effects of environmental pressures on two dimensions of hospital performance: hospital efficiency and uncompensated care provision. METHODOLOGY/APPROACH: Longitudinal data for the Commonwealth of Virginia from 1998 to 2004 were analyzed. Data Envelopment Analysis and bivariate probit were used to examine the factors associated with efficiency and uncompensated care. FINDINGS: The results indicated that a positive relationship between hospital efficiency and uncompensated care provision exists. That is, hospitals that are categorized as efficient are likely to provide more uncompensated care. We also found that hospitals tended to provide more uncompensated care when increased demand for these services occurred in a market. Increases in Medicare or Medicaid patient share reduced the provision of uncompensated care. In relation to hospital efficiency, the results indicated that HMO penetration and Medicaid patient share reduced hospital efficiency. PRACTICE IMPLICATIONS: This study found that efficient hospitals tend to provide more uncompensated care over time. The findings also suggest that hospitals alter their efficiency and provision of uncompensated care in response to a number of environmental pressures, but it may depend on the type of pressures or uncertainties encountered.

Variations in inpatient mortality among hospitals in different system types, 1995 to 2000.

BACKGROUND: Relatively few studies focused on the impact of system formation and hospital merger on quality, and these studies reported typically little or no quality effect. OBJECTIVE: To study associations among 5 main types of health systems--centralized, centralized physician/insurance, moderately centralized, decentralized, and independent--and inpatient mortality from acute myocardial infarction (AMI), congestive heart failure, stroke, and pneumonia. DATA AND METHODS: Panel data (1995-2000) were assembled from 11 states and multiple sources: Agency for Healthcare Research and Quality State Inpatient Database, American Hospital Association Annual Surveys, Area Resource File, HMO InterStudy, and the Centers for Medicare and Medicaid Services. We applied a panel study design with fixed effects models using information on variation within hospitals. RESULTS: We found that centralized health systems are associated with lower AMI, congestive heart failure, and pneumonia mortality. Independent hospital systems had better AMI quality outcomes than centralized physician/insurance and moderately centralized health systems. We found no difference in inpatient mortality among system types for the stroke outcome. Thus, for certain types of clinical service lines and patients, hospital system type matters. Research that focuses only on system membership may mask the impact of system type on the quality of care.

Hospital Financial Conditions and the Provision of Unprofitable Services.

Increases in hospital financial pressure resulting from public and private payment policy may substantially reduce a hospital's ability to provide certain services that are not well compensated or are frequently used by the uninsured. The objective of this study is to examine the impact of hospital financial condition on the provision of these unprofitable services for the insured and uninsured. Economic theory provides the conceptual underpinnings for the analysis, and a longitudinal empirical analysis is conducted for an eight-year study period. The results indicate that not-for-profit hospitals with strong financial performance provide more unprofitable services for the insured and uninsured than do not-for-profit hospitals with weaker condition. For-profit hospital provision of these services is not influenced by their financial condition and instead may reflect actions to meet community expectations or to offer a sufficiently broad service array to maintain the business of insured patients.

Preventable Hospital Admissions and 30-Day All-Cause Readmissions: Does Hospital Participation in Accountable Care Organizations Improve Quality of Care?

This study evaluates quality performance of hospitals participating in Medicare Shared Savings and Pioneer Accountable Care Organization (ACO) programs relative to nonparticipating hospitals. Overall, 198 ACO participating and 1210 propensity score matched, nonparticipating hospitals were examined in a difference-in-difference analysis, using data from 17 states in the years 2010-2013. The authors studied preventable hospitalizations for conditions sensitive to high-quality ambulatory care-chronic obstructive pulmonary disease (COPD) and asthma, chronic heart failure (CHF), complications of diabetes-and 30-day all-cause readmissions potentially influenced by hospital care. A decrease was found in preventable hospitalizations for COPD and asthma and for diabetes complications for ACO participating hospitals, but no significant differences for preventable CHF hospitalizations and 30-day readmissions. Mixed results may be attributable to insufficient incentives for ACO participating hospitals to decrease 30-day readmissions, whereas disease-focused initiatives may have a beneficial effect on preventable hospitalizations for COPD and asthma and complications of diabetes.

Hospital staffing decisions: does financial performance matter?

This study assesses the impact of changes in hospitals' financial conditions on changes in hospitals' staffing decisions. The sample consisted of community hospitals operating between 1995 and 2000. The analysis employed a generalized method of moments (GMM) estimator for its dynamic panel data. Cash flow and patient margin were used to measure financial condition. We estimated the effect of changing financial condition on the number of full-time equivalent personnel (FTEs), registered nurses (RNs), and licensed practical nurses (LPNs) per 1,000 adjusted patient days. Our results suggest that declining financial performance led to cutbacks in LPN FTEs per adjusted patient day, but the effects on total hospital FTEs and RN FTEs were mixed.

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

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.

Hospital-Acquired Infections Under Pay-for-Performance Systems: an Administrative Perspective on Management and Change.

PURPOSE OF REVIEW: The purpose of this review is to explore the impact of hospital-acquired infection on payment under pay-for-performance systems, and provide perspective on the role of administrators in infection prevention. RECENT FINDINGS: Hospital-acquired infections continue to pose a serious threat to patient safety and to the fiscal viability of healthcare facilities under pay-for-performance systems. There is mixed evidence that use of pay-for-performance systems leads to prevention of hospital-acquired conditions. Use of evidence-based guidelines has been shown to reduce hospital-acquired infections. Increasing use of pay-for-performance (PFP) systems results in potential loss of reimbursement for healthcare organizations that fail to prevent hospital-acquired infections (HAI). Healthcare administrators must work with front-line providers and infection control staff to establish and maintain evidence-based infection prevention policy. Additionally, infection control policy should be regularly updated to reflect best practices, and proper change management techniques should be employed in order to mobilize and empower staff to increase their ability to prevent hospital-acquired infections.

Hospital financial condition and operational decisions related to the quality of hospital care.

Financial pressure mounted for hospitals nationwide during the late 1990s. Our study examines how this affected the quality of their operations in terms of organizational infrastructure and processes that support the delivery of care. Our sample consisted of community hospitals operating between 1995 and 2000. Financial pressure was measured based on changes in net patient revenues per adjusted patient day and the ratio of cash flow to total revenues. The authors examined effects on hospital investments in plant and equipment and on hospital standards compliance with selected Joint Commission on Accreditation of Healthcare Organization performance areas. The results suggest that increasing financial pressures did lead to cutbacks in these areas. These findings suggest the importance of looking broadly across hospital operations to identify factors that may contribute to poor patient outcomes. Given the findings of earlier studies, these results suggest that poor outcomes may in part result from deterioration in supporting infrastructure and organizational processes.

Hospital inefficiency: what is the impact of membership in different types of systems?

The primary objective of this study is to assess whether systematic differences in inefficiency are associated with hospital membership in different types of systems. We employed the Battese/Coelli simultaneous stochastic frontier analysis (SFA) technique to estimate hospital cost inefficiency. Mean estimated inefficiency was 8.42%. Membership in different types of systems was related to estimated cost inefficiency (p < .05). Compared to hospitals that were members of centralized health systems, membership in centralized physician/insurance or decentralized systems was associated with decreased inefficiency; membership in independent systems was associated with increased inefficiency.