Participation in mandatory value-based payment programs from CMS is associated with significantly higher annual administrative costs for hospitals, according to a study published Aug. 7 in JAMA Health Forum.
Researchers at the Brown University School of Public Health in Providence, R.I., examined 2006 to 2020 Medicare cost report data for 4,332 hospitals, including 2,820 that participated in the Hospital Value-Based Purchasing program, Hospital Readmissions Reduction Program and Hospital-Acquired Condition Reduction Program. They also assessed costs associated with participation in the Comprehensive Care for Joint Replacement model.
Researchers compared administrative costs among hospitals participating in these programs to three groups exempt from the programs: general acute care hospitals in Maryland (paid under the state’s separate all-payer model), critical access hospitals and long-term acute care hospitals.
Participation in the first three programs was tied to annual administrative cost increases ranging from $650,000 per hospital compared with long-term acute care hospitals to $1.23 million compared with general acute care hospitals in Maryland. Participation in the CJR model was linked to a $1.4 million annual increase in administrative costs per hospital.
Aggregated nationally, the programs accounted for more than $3 billion in additional annual administrative spending.
“These findings suggest that hospitals may have expanded administrative staffing and workflows to meet the requirements of value-based payment programs, including reporting, care coordination, data management and analytics, and clinical documentation and risk adjustment,” researchers wrote.
The increases were more pronounced at hospitals with higher Medicare Advantage penetration and in states that expanded Medicaid, the study found.
The results carry added weight for hospitals bracing for CJR-X, the first mandatory, nationwide episode-based payment model for joint replacements set to launch Jan. 1, 2028.
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