Elements of Program Design in Medicare’s Value-based and Alternative Payment Models: a Narrative Review

Increasing emphasis on value in health care has spurred the development of value-based and alternative payment models. Inherent in these models are choices around program scope (broad vs. narrow); selecting absolute or relative performance targets; rewarding improvement, achievement, or both; and offering penalties, rewards, or both. We examined and classified current Medicare payment models—the Hospital Readmissions Reduction Program (HRRP), Hospital Value-Based Purchasing Program (HVBP), Hospital-Acquired Conditions Reduction Program (HACRP), Medicare Advantage Quality Star Rating program, Physician Value-Based Payment Modifier (VM) and its successor, the Merit-Based Incentive Payment System (MIPS), and the Medicare Shared Savings Program (MSSP) on these elements of program design and reviewed the literature to place findings in context. We found that current Medicare payment models vary significantly across each parameter of program design examined. For example, in terms of scope, the HRRP focuses exclusively on risk-standardized excess readmissions and the HACRP on patient safety. In contrast, HVBP includes 21 measures in five domains, including both quality and cost measures. Choices regarding penalties versus bonuses are similarly variable: HRRP and HACRP are penalty-only; HVBP, VM, and MIPS are penalty-or-bonus; and the MSSP and MA quality star rating programs are largely bonus-only. Each choice has distinct pros and cons that impact program efficacy. Unfortunately, there are scant data to inform which program design choice is best. While no one approach is clearly superior to another, the variability contained within these programs provides an important opportunity for Medicare and others to learn from these undertakings and to use that knowledge to inform future policymaking.