CMS' mandatory VBC programs brought substantial administrative costs for hospitals: study

A study published in JAMA Health Forum has found that hospitals participating in mandatory value-based payment programs overseen by the Centers for Medicare and Medicaid Services (CMS) face higher annual administrative costs. The research, which reviewed Medicare cost report data from 2008 to 2020, examined the impact of three mandatory programs—Hospital Value-Based Purchasing (HVBP), Hospital Readmissions Reduction Program (HRRP), and Hospital-Acquired Condition Reduction Program (HACRP)—as well as the Comprehensive Care for Joint Replacement (CJR) model.

From 2008 to 2020, participating hospitals incurred more than $3 billion in additional administrative costs, with the increases varying based on hospital type and programs involved. Specifically, general acute hospitals experienced an additional $1.23 million, critical access hospitals faced an extra $930,000, and long-term acute care hospitals incurred an additional $650,000 annually.

For the CJR model, participating hospitals saw an annual $1.4 million rise in administrative costs compared to non-participating hospitals. Researchers noted that these increases were due to expanded staffing, workflow adjustments, and increased emphasis on reporting, care coordination, clinical documentation, and risk adjustment.

The study suggests that CMS' mandatory value-based payment programs may be increasing hospitals' administrative burden and recommends that policymakers consider these factors when evaluating alternative payment models. Despite some hospital industry associations supporting the expansion of value-based models, they argue that mandatory participation in programs like CJR-X could pose significant challenges, particularly for smaller hospitals lacking the resources to invest in necessary care redesign.