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FOTO Rehab Outcomes Blog

Smart Risk Adjustment Required in Pay for Performance Models

Ghosts, goblins and zombies are today's focus for many kids (and adults). Of course, there are some of us more focused on candy and treats. I read a recent article that brings scary and treats (or lack of treats) into the real health care world.

Value based care is not longer a futuristic term. I like to see value based care as simple as patients receiving more bang for their buck. The payers want the same thing... and the providers, obviously want their treats if they can deliver. The scary reality is that some of the pay for performance programs are not being designed with the reality of what patients are really like.risk-adjustment-pay-for-performance-models

The pay-for-performance programs do not appropriately risk adjust patients leading to penalization of hospitals when social determinants of health are not considered. 


I find that statement scarier than ghosts, goblins or zombies. The patients we serve have different characteristics that can affect their outcomes, depending on why they need services. If you review the article, you will see that operating and total margins can be significantly affected.

FOTO continues to grow and improve the risk adjustment process for patients undergoing rehabilitation services. Originally, the risk adjustment process could be viewed as static. All the same factors were applied to every single patient. As of 2017, I would describe the risk adjustment process as "smart." Factors that are specifically known to affect the outcome are applied in the predictive analytics process. This should improve a pay for performance model by mitigating the provider's risk.

You can view the abstract below.

Financial Performance of Hospitals in the Mississippi Delta Region Under the Hospital Readmissions Reduction Program and Hospital Value-based Purchasing Program.




Previous studies showed that the Hospital Readmissions Reduction Program (HRRP) and the Hospital Value-based Purchasing Program (HVBP) disproportionately penalized hospitals caring for the poor. The Mississippi Delta Region (Delta Region) is among the most socioeconomically disadvantaged areas in the United States. The financial performance of hospitals in the Delta Region under both HRRP and HVBP remains unclear.


To compare the differences in financial performance under both HRRP and HVBP between hospitals in the Delta Region (Delta hospitals) and others in the nation (non-Delta hospitals).


We used a 7-year panel dataset and applied difference-in-difference models to examine operating and total margin between Delta and non-Delta hospitals in 3 time periods: preperiod (2008-2010); postperiod 1 (2011-2012); and postperiod 2 (2013-2014).


The Delta hospitals had a 0.89% and 4.24% reduction in operating margin in postperiods 1 and 2, respectively, whereas the non-Delta hospitals had 1.13% and 1% increases in operating margin in postperiods 1 and 2, respectively. The disparity in total margins also widened as Delta hospitals had a 1.98% increase in postperiod 1, but a 0.30% reduction in postperiod 2, whereas non-Delta hospitals had 1.27% and 2.28% increases in postperiods 1 and 2, respectively.


The gap in financial performance between Delta and non-Delta hospitals widened following the implementation of HRRP and HVBP. Policy makers should modify these 2 programs to ensure that resources are not moved from the communities that need them most.

 2017 Nov;55(11):924-930. doi: 10.1097/MLR.0000000000000808.