The healthcare industry is a complex beast, and mandatory value-based payment programs are adding a whole new layer of complexity for hospitals. A recent study published in JAMA Health Forum highlights the substantial administrative costs that these programs can impose on hospitals, with some estimates reaching into the millions of dollars annually. This is a significant burden, especially for smaller hospitals that may lack the scale or financial capacity to make the necessary investments in care redesign.
The study analyzed Medicare cost report data for over 2,800 hospitals that participated in three mandatory programs initiated by the Centers for Medicare and Medicaid Services (CMS) under the Affordable Care Act: the Hospital Value-Based Purchasing (HVBP) program, Hospital Readmissions Reduction Program (HRRP), and Hospital-Acquired Condition Reduction Program (HACRP). The findings were striking. From 2008 to 2020, these programs resulted in over $3 billion in additional administrative costs for hospitals, with average annual increases ranging from hundreds of thousands to millions of dollars, depending on the hospital type and programs participated in.
The researchers attributed these increases to the need for hospitals to expand their staffing and workflows to meet program requirements, such as reporting, care coordination, clinical documentation, and risk adjustment. This burden is likely to extend beyond mandatory programs, as the study suggests that similar trends are evident in non-mandatory value-based models and other CMS programs that emphasize quality reporting.
The study also compared hospitals that participated in the Comprehensive Care for Joint Replacement (CJR) model to those that did not. Participation in the CJR model was associated with an annual increase of $1.4 million in administrative costs per hospital. For hospitals that participated in all four models, the annual per-hospital administrative cost increases were even more staggering, ranging from $2.06 million to $2.78 million compared to non-participating hospitals.
These findings raise concerns about the administrative burden imposed by CMS's value-based payment programs. The researchers argue that policymakers should carefully consider the trade-offs between anticipated improvements in cost, quality, or access and the increases in resource-intensive complexity. The hospital industry associations have expressed similar concerns, urging CMS to adopt a phased or voluntary approach to help hospitals prepare for the CJR-X Model, which is set to be expanded nationwide in 2028.
The CJR model itself, which ran from 2016 to 2024, has been touted by CMS officials as a driver of over $100 million in savings while maintaining quality of care. However, the study's findings suggest that the administrative burden may outweigh the benefits for some hospitals, particularly those with limited resources. The hospital associations have criticized the overly complex requirements and overlapping accountability obligations of the CJR-X Model, emphasizing the need for flexibility and a more gradual implementation.
In conclusion, the study highlights the significant administrative costs associated with CMS's mandatory value-based payment programs. While these programs aim to improve healthcare quality and efficiency, they may inadvertently create a complex and resource-intensive environment for hospitals. Policymakers and healthcare administrators must carefully consider the trade-offs and explore alternative approaches to ensure that the benefits of these programs are realized without imposing undue burdens on hospitals, especially those with limited resources.
