Association of Hospital Payment Profiles With Variation in 30-Day Medicare Cost for Inpatients With Heart Failure or Pneumonia

IMPORTANCE: Some uncertainty exists about whether hospital variations in cost are largely associated with differences in case mix. OBJECTIVE: To establish whether the same patients admitted with the same diagnosis (heart failure or pneumonia) at 2 different hospitals incur different costs associated with the hospital’s Medicare payment profile. DESIGN, SETTING, AND PARTICIPANTS: This observational cohort study used Centers for Medicare & Medicaid Services (CMS) discharge data of patients with a principal diagnosis of heart failure (n = 1615) or pneumonia (n = 708) occurring between July 1, 2013, and June 30, 2016. Patients were individuals aged 65 years or older who were enrolled in Medicare fee-for-service Part A and Part B and were discharged from nonfederal, short-term, acute care or critical access hospitals in the United States. Data were analyzed from March 16, 2018, to September 25, 2019. MAIN OUTCOMES AND MEASURES: The CMS heart failure and pneumonia payment measure cohorts were divided into 2 random samples. In the first sample, hospitals were classified into payment quartiles for heart failure and pneumonia. In the second sample, patients with 2 admissions for heart failure or pneumonia, one in a lowest-quartile hospital and one in a highest-quartile hospital more than 1 month apart, were identified. Standardized Medicare payments for these patients were compared for the lowest- and the highest-quartile payment hospitals. RESULTS: The study sample included 1615 patients with heart failure (mean [SD] age, 78.7 [8.0] years; 819 [50.7%] male) and 708 with pneumonia (mean [SD] age, 78.3 [8.0] years; 401 [56.6%] male). The observed 30-day mortality rates for patients among lowest- compared with highest-payment hospitals were not significantly different. The median (interquartile range) hospital 30-day risk-standardized mortality rates were 8.1% (7.7%-8.5%) for heart failure and 11.3% (10.7%-12.1%) for pneumonia. The 30-day episode payment for hospitalization for the same patients at the lowest-payment hospitals was $2118 (95% CI, $1168-$3068; P < .001) lower for heart failure and $2907 (95% CI, $1760-$4054; P < .001) lower for pneumonia than at the highest-payment hospitals. More than half of the difference was associated with the payment during the index hospitalization ($1425 [95% CI, $695-$2154; P < .001] for heart failure and $1659 [95% CI, $731-$2588; P < .001] for pneumonia). CONCLUSIONS AND RELEVANCE: This study found that the same Medicare beneficiaries who were admitted with the same diagnosis to hospitals with the highest payment profiles incurred higher costs than when they were admitted to hospitals with the lowest payment profiles. The findings suggest that variations in payments to hospitals are, at least in part, associated with the hospitals independently of non–time-varying patient characteristics.