Moneyball in Medicare

Edward C. Norton, Jun Li, Anup Das, Lena M. Chen

NBER Working Paper No. 22371
Issued in June 2016
NBER Program(s):Health Care, Health Economics

US policymakers place a high priority on tying Medicare payments to the value of care delivered. A critical part of this effort is the Hospital Value-based Purchasing Program (HVBP), which rewards or penalizes hospitals based on their quality and episode-based costs of care. Within HVBP, each patient affects hospital performance on a variety of quality and spending measures, and performance translates directly to changes in program points and ultimately dollars. In short, hospital revenue from a patient consists not only of the DRG payment, but also consists of that patient’s marginal future reimbursement. We estimate the magnitude of the marginal future reimbursement for individual patients across each type of quality and performance measure. We describe how those incentives differ across hospitals, including integrated and safety-net hospitals. We find some evidence that hospitals improved their performance over time in the areas where they have the highest marginal incentives to improve care.

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Document Object Identifier (DOI): 10.3386/w22371

Published: Edward C. Norton & Jun Li & Anup Das & Lena M. Chen, 2017. "Moneyball in Medicare," Journal of Health Economics, .

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