Health Systems Action

Learning from America?

America spends an enormous amount (nearly 18% of GDP) on health care.

Total US health care spend (2022): $4.5 trillion! [$1 trillion is 1,000,000,000,000 dollars]

Per capita spend (2022): $13,493! [i.e., more than ZAR250,000 per person per year]

Despite the huge outlay, the US achieves worse health outcomes than other wealthy countries. For example, life expectancy that’s 3 years lower than the OECD average.

Not a great model to emulate but perhaps we can we learn from their methods and experience.


Many Americans say they don’t want “socialised” medicine but much of their system is publicly funded. The CMS (Council for Medicare and Medicaid Services) budget (2023) alone – $1,48 trillion – makes up a third of the total and, importantly, they set standards.

With 531 official measures listed in their Measure Inventory, CMS are serious about measurement. Believe it or not, this is a reduction from thousands used previously. 

These measures are intended to serve eight National Quality Strategy goals – “outcomes and alignment”, “equity and engagement”, “safety and resiliency”, “interoperability and scientific advancement”.

CMS National Quality Strategy Goals. Image source:

Volume to Value

As part of the intended shift “from volume to value”, three CMS programs adjust payments to acute hospitals based on their measured performance: the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reduction Program (HRRP), and the Hospital-Acquired Condition (HAC) Reduction Program.

Let’s look at the Hospital Value-Based Purchasing (VBP) Program.

It gets complicated, as CMS tries to recognise various aspects of quality/performance, while fairly adjusting for factors outside a hospital’s control.

The Total Performance Score (TPS) for each hospital is based on performance scores in four domains, each one (Table 1) equally weighted, contributing 25 percent to the score:

  • Safety
  • Clinical outcomes
  • Person and community engagement
  • Efficiency and cost reduction

SafetyCAUTICatheter-associated urinary tract infection
CLABSICentral line-associated blood stream infection
CDIClostridium difficile infection (C. difficile)
MRSAMethicillin-resistant Staphylococcus aureus bacteremia
SSISurgical site infection: Colon Abdominal hysterectomy
Clinical OutcomesMORT-30-AMIAcute myocardial infarction (AMI) 30-day mortality rate
MORT-30-CABGCoronary artery bypass grafting (CABG) 30-day mortality rate
MORT-30-COPDChronic obstructive pulmonary disease (COPD) 30-day mortality rate
MORT-30-HFHeart failure (HF) 30-day mortality rate
MORT-30-PNPneumonia (PN) 30-day mortality rate
COMP-HIP-KNEETotal hip arthroplasty (THA) and/or total knee arthroplasty (TKA) complication rate
Efficiency and Cost ReductionMSPBMedicare spending per beneficiary (MSPB)
Person and Community EngagementHCAHPS SurveyCommunication with Nurses Communication with Doctors Responsiveness of Hospital Staff Communication about Medicines Hospital Cleanliness and Quietness Discharge Information Care Transition Overall Rating of Hospital

Interestingly, both achievement and improvement are recognised and valued.

Hospitals are scored separately on each measure for achievement and improvement, with the final score being the higher of the two.

The Benchmark is the average (mean) performance of the top 10% of hospitals during the baseline period. The Achievement Threshold is the media performance at the 50th percentile of hospitals during the baseline period.

Source: What’s My Payment? Understanding the Hospital VBP Program. Calculations Step Step-By-Step in the Percentage Payment Summary Report (CMS) 2019

Achievement points are awarded by comparing an individual hospital’s rates during the

performance period to all hospitals’ rates from the baseline period:

  • Hospital rates at or better than the Benchmark score 10 Achievement points
  • A hospital that rates worse than the Achievement threshold scores 0 Achievement points
  • A hospital whose rate is equal to or better than the Achievement threshold but worse than the Benchmark gets between 1 and 9 Achievement points

Improvement points are awarded by comparing a hospital’s rates during the performance

period to that same hospital’s rates from the baseline period:

  • 9 points for a rate at or better than the Benchmark
  • 0 points for a rate worse than or equal to baseline period rate
  • A rate between the baseline period rate and the benchmark is awarded 1 to 9 points

For reliability, hospitals must have a minimum requirement of cases for each measure to receive a measure score and a minimum number of those measures to receive a domain score.

Person and Community Engagement Consistency Points are also calculated, based on the HCAHPS scores.

Finally, the ‘exchange function slope’ is used to determine payments, and is calculated  dependent on the range and distribution of TPSs of all participating hospitals, the distribution and amount of total estimated funds available for redistribution, and the amount of the individual hospital’s base operating DRG payment amounts and TPS.

Funding the incentives

Incentive payments are funded by a 2% withholding of DRG-based payments each fiscal year, creating a pool of funds for redistribution to hospitals based on their VBP performance. The program is budget neutral.

Recent results

In 2020, the eighth year of the program, around $1.9 billion in incentives was distributed.

More hospitals (55%) received positive payment adjustments than negative ones.

The average net payment adjustment was only 0.16%; the highest performing hospital received a 2.93% increase and the lowest performing hospital saw a 1.72% decrease.



It’s a decade since the CMS value-based payment programs began. Billions of dollars are at stake. But payouts and adjustments have so far been relatively small in relation to the total budget. Are they enough to make value-based care a priority? US hospital margins are thin (about 1%), especially compared to SA private hospitals, so these amounts can put a hospital in the black (or red).

The US Congress requires the CMS programs to be at least budget neutral if not cost saving, so money moves from low to high performers. As worse performing hospitals are financially penalised, an interesting question is whether penalties cause them to deteriorate further or lead to improvement. Given their cost, complexity and administrative burden, the very existence or continuance of these programs has been questioned.

A decade into it, refinements are still needed to ensure that these programs work as intended and that they support the reduction of health disparities and improve outcomes.

A recent article in Health Affairs, the third in a series starting in 2015, raises methodological concerns, for example that the payment system may not adequately consider patient factors, community health equity risk factors, and hospital characteristics, potentially leading to unfair penalties for hospitals including those that serve more vulnerable populations and communities. The Biden administration is trying to address these disparities, by incorporating equity metrics into the program. The COVID-19 pandemic further complicated these issues by disrupting patient care and highlighting disparities.

The adjustment factors examined/used include: community resilience, Area Deprivation Index, poverty, employment status, living alone, crowded housing, low literacy, non-English first language, and levels of uncompensated care. The article, and a Health Affairs podcast with one of the authors, focus on composite measures which they say are good for simplicity, and communication, but don’t help much with the “road map” to improvement. Composite measures used in risk adjustment can perform differently depending on the context, and it may be more informative to examine the associations between individual factors and performance to see the best next steps (to better care) – the things most associated with difficulties that patients face, and those that hospitals can (or cannot) affect.

The program also publicly reports hospital performance, which is supposed to help consumers make more informed decisions. To do so, it has to address the questions and priorities that consumers (including subgroups of consumers) actually have, present information credibly and in a way that is understood by the intended audience, reach the intended audience, and enable consumers to act on the information.

In South African we grapple with issues of health care quality, value and equity too. Can the US experience help us identify best performers to learn from or to reward? Will our judgements be fair? How will we construct effective financial incentives?

In future articles we’ll look at the CMS readmissions and hospital-acquired complications programs. These are penalty programs which have savings projected.

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