NCPA - National Center for Policy Analysis


July 1, 2010

Pay-for-performance models will exaggerate regional disparities in care and further penalize hospitals serving poor communities, according to a study published in the journal PLoS Medicine.  According to the researchers, this finding means that hospital quality variations are "substantially associated" with a region's economic and workforce resources. 

For the study, researchers from New York University Medical School analyzed performance for two common cardiac conditions -- heart attack and heart failure -- at 2,705 hospitals between 2004 and 2007 and regional variation across five "dimensions of location": poverty, unemployment, provider shortage, non-high school graduates in the work force and college graduates in the work force. 

Using quality measures from the Hospital Quality Alliance (HQA), the researchers found that clinical performance for the conditions varied across facilities and that hospitals located in disadvantaged regions delivered poorer quality care than facilities located in wealthier and better-educated communities.  For example: 

  • Hospitals in poor counties had a HQA score of 73, compared with 84.1 among hospitals in wealthier counties.
  • Hospitals located in regions with fewer college graduates had an average HQA score of 76.7, compared with a score of 86.2 for hospitals in regions with the highest amount of college graduates. 

The researchers note that although overall performance for heart attack and heart failure improved across the study, quality at hospitals in disadvantaged regions continued to "lag significantly behind" better-advantaged peer institutions.  The researchers determined that these facilities would receive reduced reimbursement under a pay-for-performance system.  Noting that nearly 33 percent of the hospitals studied were in "locationally disadvantaged" counties, the researchers warn that a pay-for-performance model may "exacerbate inequalities" across regions by rewarding hospitals located in regions that are rich in economic and human resources, and punishing facilities that are in disadvantaged locations. 

To divorce hospital quality from locational factors, the researchers say policymakers must be cognizant of whether hospitals have a "level playing field to begin with," and suggest using a hospital's baseline score to measure improvement, rather than compare a "low-attaining" facility with institutions that may start at a higher baseline.  Additionally, the researchers say the Centers for Medicare & Medicaid Services (CMS) could reward quality improvement regardless of a hospital's starting point. 

Source: Audrey Horn, "MEDICARE: Disadvantaged Hospitals Might Struggle Under Pay-for-Performance Model," American Health Line, June 29, 2010.

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