Variation in Medicare Payments and Reimbursement Rates for Hepatopancreatic Surgery Based on Quality: Is There a Financial Incentive for High-Quality Hospitals?

Abstract

To better define the financial impact of high-quality care for payers and hospitals, we compared outcomes and Medicare payments between high-quality (HQ) and low-quality (LQ) hospitals after hepatopancreatic surgery. Between 2013 through 2015, a total of 15,874 Medicare beneficiaries underwent hepatopancreatic surgery. Using the entire cohort, multivariable logistic regression was performed to categorize hospitals into quintiles based on the probability of experiencing a major complication; HQ (bottom 20%) and LQ (top 20%) hospitals were identified. Only HQ and LQ hospitals were included in the final propensity matching to compare payments. Major complication was defined as a complication associated with a length of stay of >75th percentile. Incremental payment and cost of complication were estimated using multivariable linear regression. Major complications occurred in 9.7% (n= 309 of 3,182) at HQ hospitals compared with 20% (n= 625 of 3,130) at LQ hospitals (p < 0.001). The incremental increased payment associated with major complication was $29,640, which was lower than the incremental hospital cost of $42,935. The Medicare reimbursement rate was also 6% lower at both HQ and LQ hospitals when a major complication occurred vs not; however, HQ hospitals had a 3% higher reimbursement rate compared with LQ hospitals when a major complication did not occur (p= 0.002). Mean unadjusted Medicare payment was lower at HQ hospitals by $5,165 per patient vs LQ hospitals (p < 0.001), largely because HQ hospitals had a lower overall incidence of major complications (n= 315 vs n= 625). By having 310 fewer patients with a major complication, HQ hospitals collectively achieved $3.1 million/year in Medicare savings. High-quality hospitals are able to achieve substantial Medicare savings by avoiding major complications. Occurrence of major complications was associated with lower Medicare reimbursement rates at both HQ and LQ hospitals vs when no complications occurred.