The Value-Based Payment Modifier: Program Outcomes and Implications for Disparities

Ann Intern Med. 2018 Feb 20;168(4):255-265. doi: 10.7326/M17-1740. Epub 2018 Nov 28.


Background: When risk adjustment is inadequate and incentives are weak, pay-for-performance programs, such as the Value-Based Payment Modifier (Value Modifier [VM]) implemented by the Centers for Medicare & Medicaid Services, may contribute to health care disparities without improving performance on average.

Objective: To estimate the association between VM exposure and performance on quality and spending measures and to assess the effects of adjusting for additional patient characteristics on performance differences between practices serving higher-risk and those serving lower-risk patients.

Design: Exploiting the phase-in of the VM on the basis of practice size, regression discontinuity analysis and 2014 Medicare claims were used to estimate differences in practice performance associated with exposure of practices with 100 or more clinicians to full VM incentives (bonuses and penalties) and exposure of practices with 10 or more clinicians to partial incentives (bonuses only). Analyses were repeated with 2015 claims to estimate performance differences associated with a second year of exposure above the threshold of 100 or more clinicians. Performance differences were assessed between practices serving higher- and those serving lower-risk patients after standard Medicare adjustments versus adjustment for additional patient characteristics.

Setting: Fee-for-service Medicare.

Patients: Random 20% sample of beneficiaries.

Measurements: Hospitalization for ambulatory care-sensitive conditions, all-cause 30-day readmissions, Medicare spending, and mortality.

Results: No statistically significant discontinuities were found at the threshold of 10 or more or 100 or more clinicians in the relationship between practice size and performance on quality or spending measures in either year. Adjustment for additional patient characteristics narrowed performance differences by 9.2% to 67.9% between practices in the highest and those in the lowest quartile of Medicaid patients and Hierarchical Condition Category scores.

Limitation: Observational design and administrative data.

Conclusion: The VM was not associated with differences in performance on program measures. Performance differences between practices serving higher- and those serving lower-risk patients were affected considerably by additional adjustments, suggesting a potential for Medicare's pay-for-performance programs to exacerbate health care disparities.

Primary funding source: The Laura and John Arnold Foundation and National Institute on Aging.

Publication types

  • Observational Study
  • Research Support, N.I.H., Extramural
  • Research Support, Non-U.S. Gov't

MeSH terms

  • Aged
  • Centers for Medicare and Medicaid Services, U.S.
  • Fee-for-Service Plans / economics*
  • Female
  • Health Expenditures
  • Healthcare Disparities / economics*
  • Hospitalization / economics
  • Humans
  • Male
  • Medicare / economics*
  • Patient Readmission / economics
  • Quality of Health Care / economics*
  • Reimbursement, Incentive / economics*
  • Risk Adjustment
  • United States