The Financial Effect of Value-Based Purchasing and the Hospital Readmissions Reduction Program on Safety-Net Hospitals in 2014: A Cohort Study

Ann Intern Med. 2015 Sep 15;163(6):427-36. doi: 10.7326/M14-2813.


Background: Medicare's value-based purchasing (VBP) and the Hospital Readmissions Reduction Program (HRRP) could disproportionately affect safety-net hospitals.

Objective: To determine whether safety-net hospitals incur larger financial penalties than other hospitals under VBP and HRRP.

Design: Cross-sectional analysis.

Setting: United States in 2014.

Participants: 3022 acute care hospitals participating in VBP and the HRRP.

Measurements: Safety-net hospitals were defined as being in the top quartile of the Medicare disproportionate share hospital (DSH) patient percentage and Medicare uncompensated care (UCC) payments per bed. The differences in penalties in both total dollars and dollars per bed between safety-net hospitals and other hospitals were estimated with the use of bivariate and graphical regression methods.

Results: Safety-net hospitals in the top quartile of each measure were more likely to be penalized under VBP than other hospitals (62.9% vs. 51.0% under the DSH definition and 60.3% vs. 51.5% under the UCC per-bed definition). This was also the case under the HRRP (80.8% vs. 69.0% and 81.9% vs. 68.7%, respectively). Safety-net hospitals also had larger payment penalties ($115 900 vs. $66 600 and $150 100 vs. $54 900, respectively). On a per-bed basis, this translated to $436 versus $332 and $491 versus $314, respectively. Sensitivity analysis setting the cutoff at the top decile rather than the top quartile decile led to similar conclusions with somewhat larger differences between safety-net and other hospitals. The quadratic fit of the data indicated that the larger effect of these penalties is in the middle of the distribution of the DSH and UCC measures.

Limitation: Only 2 measures of safety-net status were included in the analyses.

Conclusion: Safety-net hospitals were disproportionately likely to be affected under VBP and the HRRP, but most incurred relatively small payment penalties in 2014.

Primary funding source: Patient-Centered Outcomes Research Institute.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Cohort Studies
  • Cross-Sectional Studies
  • Humans
  • Medicare / economics*
  • Patient Readmission / economics*
  • Safety-net Providers / economics*
  • Uncompensated Care / economics
  • United States
  • Value-Based Purchasing*