The Effect of Phase 2 of the Premier Hospital Quality Incentive Demonstration on Incentive Payments to Hospitals Caring for Disadvantaged Patients

Objective The Medicare and Premier Inc. Hospital Quality Incentive Demonstration (HQID), a hospital‐based pay‐for‐performance program, changed its incentive design from one rewarding only high performance (Phase 1) to another rewarding high performance, moderate performance, and improvement (Phase 2). We tested whether this design change reduced the gap in incentive payments among hospitals treating patients across the gradient of socioeconomic disadvantage. Data To estimate incentive payments in both phases, we used data from the Premier Inc. website and from Medicare Provider Analysis and Review files. We used data from the American Hospital Association Annual Survey and Centers for Medicare and Medicaid Services Impact File to identify hospital characteristics. Study Design Hospitals were divided into quartiles based on their Disproportionate Share Index (DSH), from lowest disadvantage (Quartile 1) to highest disadvantage (Quartile 4). In both phases of the HQID, we tested for differences across the DSH quartiles for three outcomes: (1) receipt of any incentive payments; (2) total incentive payments; and (3) incentive payments per discharge. For each of the study outcomes, we performed a hospital‐level difference‐in‐differences analysis to test whether the gap between Quartile 1 and the other quartiles decreased from Phase 1 to Phase 2. Principal Findings In Phase 1, there were significant gaps across the DSH quartiles for the receipt of any payment and for payment per discharge. In Phase 2, the gap was not significant for the receipt of any payment, but it remained significant for payment per discharge. For the receipt of any incentive payment, difference‐in‐difference estimates showed significant reductions in the gap between Quartile 1 and the other quartiles (Quartile 2, 17.5 percentage points [p