Summary
This memorandum provides an overview of key efforts to account for socioeconomic status (SES) in Medicare quality reporting and payment programs. Passage of the Affordable Care Act (ACA) spurred widespread adoption of incentivized pay-for-performance programs, but there is growing concern that the quality measures implemented under such programs do not adequately adjust for certain patient-related social risk factors that affect health outcomes. For example, in 2013, 77 percent of hospitals that treat a higher-risk, lower-income beneficiary population were subject to penalties under the Hospital Readmission Reduction Program (HRRP), versus 36 percent of those with a low number of such patients.
Serving disadvantaged patients often results in poor quality ratings and disproportionate payment penalties. This may reduce hospital resources needed to serve such a population and create a disincentive to continue doing so, which in turn, could further exacerbate health disparities.
Risk adjustment—a practice that aims to improve measurement accuracy—could account for differences in patient characteristics when measuring quality and calculating payments. In the full analysis linked to the right, we provide an overview of the key federal agencies working to define SES, develop new quality measures, and more accurately reflect provider performance without obscuring the quality of patient outcomes.