Win Whitcomb: Hospital Value-Based Purchasing Program Adds Measure in Efficiency Domain


HVBP’s First Efficiency Measure

Move over, cost, LOS—make room for ‘Medicare spending per beneficiary’

The unwritten rule in hospitalist circles is that lower cost and length of stay (LOS) mean higher efficiency, with hospitalists (me included) often pointing to one or both of these as a yardstick of performance in the efficiency domain. But if we lower hospital length of stay and costs while shifting costs to post-hospital care, have we solved anything?

This very question was raised by Kuo and Goodwin’s observational study that revealed that decreased hospital costs and LOS were offset by higher utilization and costs after discharge under hospitalist care.1

Efficiency As a Domain of Quality

Figure 1. Medicare Spending Per Beneficiary (MSPB)

Medicare Parts A and B spending per beneficiary between three days prior to inpatient admission and 30 days post-hospital discharge. Risk-adjusted and price-standardized. Reported as a ratio:

Hospital's medicare spending per beneficiary

National median medicare spending per beneficiary

Using the Institute of Medicine’s (IOM) six domains of quality as a framework (see Table 1, right), the Centers for Medicare & Medicaid Services’ (CMS) Hospital Value-Based Purchasing (HVBP) program seeks to encourage enhanced quality in all of the IOM domains. For HVBP 2015, we see the addition of the first measure in the domain of efficiency.

You may be saying to yourself, “It’s only 2013. Why should I worry about HVBP 2015?” Here’s why: The measurement periods for HVBP 2015 are May to December 2011 (baseline) and May to December 2013 (performance). Hospitals can succeed under HVBP if they demonstrate improvement from baseline or attainment, which indicates maintenance of a high level of performance despite no substantial improvement from baseline. Medicare spending per beneficiary (MSPB) will make up 20% of the 2015 HVBP incentive pool for hospitals.

Medicare Spending Per Beneficiary Instead of Costs or LOS

Why did CMS choose to use MSPB as a measure and not simply hospital costs or length of stay? Measuring efficiency of hospital care has proven to be a sticky wicket. If one simply measures and rewards decreased hospital costs and/or length of stay (which you might legitimately argue is exactly what the current DRG system does by paying a case rate to the hospital), one runs the risk of shifting costs to settings beyond the four walls of the hospital, or even fueling higher rates of hospital readmissions. Also, physician costs and other costs (therapy, home care) are not accounted for; they are accounted for under MSPB (described below). Finally, hospital costs and LOS vary substantially across regions and by severity of illness of the patients being analyzed. This makes it difficult to compare, for example, LOS in California versus Massachusetts.

The MSPB is designed to be a comprehensive and equitable metric:

  • It seeks to eliminate cost-shifting among settings by widening the time period from three days prior to 30 days post-inpatient-care episode;
  • It looks at the full cost of care by including expenses from both Medicare Part A (hospital) and Part B (doctors, PT, OT, home health, others);
  • It incorporates risk adjustment by taking into account differences in patient health status; and
  • It seeks to level the playing field by using a price standardization methodology that factors in geographic payment differences in wages, practice costs, and payments for indirect medical education and disproportionate share hospitals (those that treat large numbers of the indigent population).

Driving High Performance in Medicare Spending Per Beneficiary

Table 1. Six Domains of Quality Care

  • Safe
  • Effective
  • Efficient
  • Personalized or Patient-Centered
  • Timely
  • Equitable

Source: Crossing the Quality Chasm, Institute of Medicine, March 2001

Hospitalists straddle the Part A and Part B elements of Medicare; they have one foot in the hospital and one foot in the physician practice world. They should be able to improve their hospitals’ performance under the MSPB yardstick. Since the performance measurement period starts in May, now is the time to sharpen your focus on MSPB.

Here are the top priorities for MSPB that I recommend for hospitalists:

Because the performance measurement period starts in May, now is the time to sharpen your focus on MSPB.

Reduction of marginally beneficial resource utilization. This is a process of analyzing resource (e.g. pharmacy, radiology, laboratory, blood products) utilization for the purpose of minimizing costly practices that do not benefit the patient. This is an essential practice of a high-functioning hospitalist program. Through its participation in the Choosing Wisely campaign (see “Stop! Think Twice Before You Order,” p. 46), SHM has helped hospitalists have conversations about these practices with patients.

Hospital throughput. Work on “front end” throughput with the ED by having a process in place to quickly evaluate and facilitate potential admissions. Work with case management to assure timely (and early in the day) discharges.

Safe-discharge processes. We reviewed key elements of a safe discharge last month and provided a link to SHM’s Project BOOST (www.hospitalmedicine.org/boost). From the MSPB perspective: A safe discharge minimizes exorbitant spending after discharge.

Documentation integrity. Because MSPB is risk-adjusted, the more the record reflects patient severity of illness, the better your hospital will perform, all else being equal. Work collaboratively with your documentation integrity professionals!

Much of the success of the HM specialty has been built on the tenet that the hospitalist model delivers efficient inpatient care. In the coming years, the specialty’s contribution will increasingly be gauged by the MSPB measure.


  1. Kuo YF, Goodwin JS. Association of hospitalist care with medical utilization after discharge: evidence of cost shift from a cohort study. Ann Intern Med. 2011;155(3):152-159.

Dr. Whitcomb is medical director of healthcare quality at Baystate Medical Center in Springfield, Mass. He is a co-founder and past president of SHM. Email him at [email protected].

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