Association for Public Policy Analysis & Management

Policymakers and payers aspire to use value-based purchasing (VBP) strategies to motivate better quality of care at lower prices.  Despite the theoretical appeal of VBP approaches, mechanism design can be complicated for a number of reasons including the challenges of measuring healthcare quality and the potential for unintended consequences if hospitals "teach to the test'' and ignore unmeasured or unincentivized activities that are important for patient outcomes or attempt to game the system by cream-skimming healthy patients.  The field of organ transplantation has developed one of the earliest and most comprehensive quality monitoring systems, providing online report cards assessing center performance biannually.  The supply of donor organs is significantly lower than demand from patients with organ failure.  With the exception of renal failure, which can be treated with dialysis, transplant is the only treatment that will keep organ failure patients alive.  The constrained supply and importance of successful transplant procedures for patient survival create a particular imperative to ensure that transplant centers are able to safely care for their patients.

In 2007, the Centers for Medicare and Medicaid Services (CMS) markedly increased the stakes associated with poor report card performance.  CMS issued Conditions of Participation (CoP) to transplant centers that explicitly tie the availability of public funding to report card outcomes, giving CMS the authority to shut down transplant programs, or entire centers if performance falls below accepted standards (Centers for Medicaid and Medicare Services, 2009).  In this paper, we test for strategic behavior at the center-level in response to flagging in a single organ program.  Specifically, we examine the effect of first and second reports of poor performance for adult kidney and liver programs on transplant volume, patient and graft outcomes for non-flagged heart, kidney, liver, and lung transplants before versus after the introduction of the CoP.  We also test the extent that centers increase use of paired liver-kidney transplant, which has uncertain clinical benefit relative to liver transplant alone, but is not subject to quality reporting.  Using a difference-in-differences design to analyze Scientific Registry of Transplant Recipients registry data, we find some evidence that centers reduce volume in other organ programs and increase use of clinically uncertain procedures that are not subject to quality reporting in response to flagging.

As the Centers for Medicare and Medicaid Services look to expand their use of VBP strategies, it will be important to continue assessing whether spillover effects of regulation restrict patient access to care.