Association of Stratification by Proportion of Patients Dually Enrolled in Medicare and Medicaid with Financial Penalties in the Hospital-Acquired Condition Reduction Program

Importance: The Hospital-Acquired Condition Reduction Program (HACRP) is a value-based payment program focused on safety events. Prior studies have found that the program disproportionately penalizes safety-net hospitals, which may perform more poorly because of unmeasured severity of illness rather than lower quality. A similar program, the Hospital Readmissions Reduction Program, stratifies hospitals into 5 peer groups for evaluation based on the proportion of their patients dually enrolled in Medicare and Medicaid, but the effect of stratification on the HACRP is unknown. Objective: To characterize the hospitals penalized by the HACRP and the distribution of financial penalties before and after stratification. Design, Setting, and Participants: This economic evaluation used publicly available data on HACRP performance and penalties merged with hospital characteristics and cost reports. A total of 3102 hospitals participating in the HACRP in fiscal year 2020 (covering data from July 1, 2016, to December 31, 2018) were studied. Exposures: Hospitals were divided into 5 groups based on the proportion of patients dually enrolled, and penalties were assigned to the lowest-performing quartile of hospitals in each group rather than the lowest-performing quartile overall. Main Outcomes and Measures: Penalties in the prestratification vs poststratification schemes. Results: The study identified 3102 hospitals evaluated by the HACRP. Safety-net hospitals received $111333384 in penalties before stratification compared with an estimated $79087744 after stratification - a savings of $32245640. Hospitals less likely to receive penalties after stratification included safety-net hospitals (33.6% penalized before stratification vs 24.8% after stratification, ? = -8.8 percentage points [pp], P <.001), public hospitals (34.1% vs 30.5%, ? = -3.6 pp, P =.003), hospitals in the West (26.8% vs 23.2%, ? = -3.6 pp, P <.001), hospitals in Medicaid expansion states (27.3% vs 25.6%, ? = -1.7 pp, P =.003), and hospitals caring for the most patients with disabilities (32.2% vs 28.3%, ? = -3.9 pp, P <.001) and from racial/ethnic minority backgrounds (35.1% vs 31.5%, ? = -3.6 pp, P <.001). In multivariate analyses, safety-net status and treating patients with highly medically complex conditions were associated with higher odds of moving from penalized to nonpenalized status. Conclusions and Relevance: This economic evaluation suggests that stratification of hospitals would be associated with a narrowing of disparities in penalties and a marked reduction in penalties for safety-net hospitals. Policy makers should consider adopting stratification for the HACRP.