Value‐Based Payments in Health Care: Evidence from a Nationwide Randomized Experiment in the Home Health Sector

Abstract

Value‐based payment programs, also known as pay‐for‐performance, use financial incentives to motivate providers to invest in quality and are a critical part of Medicare health care reform. This study examines the first year of the Home Health Value‐Based Purchasing program, a nationally representative cluster randomized experiment implemented by the Centers for Medicare & Medicaid Services in 2016. The goal of the program is to achieve better home health care quality. Home health agencies in treatment states were rewarded or penalized based on their performance on agency‐reported and non‐agency‐reported quality measures. The program improved agency‐reported measures by approximately one percentage point, and performance gains suggest a dose‐response relationship with respect to incentive size. However, the performance gains in agency‐reported measures did not reflect true quality improvement. I find evidence that agencies manipulated their coding of patients and inflated their performance. Coding manipulation explains the entirety of the program's impact on agency‐reported measures.

Home Health Agencies With High Quality of Patient Care Star Ratings Reduced Short-Term Hospitalization Rates and Increased Days Independently at Home

“…2 Third, most of the measures used to create the ratings are documented by home health agencies, which could be unreliable. 3 Understanding whether the star ratings predict quality is crucial due to the growing number of people wishing to age-in-place and increasing referrals to home health under value-based purchasing. 4 This study investigates whether using the highest-rated home health agency available to a ZIP code improves patient outcomes.…”

“…Another is that the risk adjustment procedures are insufficient, leading to inaccurate ratings 2 . Third, most of the measures used to create the ratings are documented by home health agencies, which could be unreliable 3 . Understanding whether the star ratings predict quality is crucial due to the growing number of people wishing to age-in-place and increasing referrals to home health under value-based purchasing 4 …”