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Understanding Spending Patterns Among Safety-Net Hospitals

May 13, 2021

By Julie Gould

Joshua M. Liao, MD, MSc, board-certified internal medicine physician, Principal Scientist in the Value & Systems Science Lab, and medical director of Payment Strategy at UW MedicineAccording to study findings published online in the American Journal of Managed Care, spending patterns for safety-net hospitals do not vary by safety-net status.

“Because safety-net hospitals may fare more poorly than other hospitals under value-based reforms, we evaluated the relationship between safety-net status and [Clinical Episode-Based Payment] episode spending,” wrote the researchers of the study.  

To better understand why the study was conducted and the clinical implications of the findings, we spoke with Joshua M. Liao MD, MSc, board-certified internal medicine physician, Principal Scientist in the Value & Systems Science Lab, and medical director of Payment Strategy at UW Medicine.  

What existing data led you and your co-investigators to conduct this research? 

The motivation for this research was the lack of existing data about the topic: how hospitals overall, and safety-net hospitals more specifically, perform with respect to episode-based spending. This knowledge gap is problematic given continued focus by Medicare and other policymakers on emphasizing episode-based spending as a way to control hospital costs and improve value. This research focused on one particular strategy: public reporting for episode-based spending using novel Clinical Episode-Based Payment (CEBP) measures. 

Please briefly describe your study and its findings. Were any of the outcomes particularly surprising?

Using data from Medicare and the American Hospital Association, we identified safety-net and non-safety-net hospitals that were eligible for CEBPs, described their characteristics, and evaluated whether hospital safety-net status was associated with risk-adjusted, standardized episode spending for each CEBP measure type.

As an early descriptive analysis–to our knowledge, the first to describe episode-based spending for safety-net and other hospitals–our goal was not to test pre-existing hypotheses. In that sense, there were no surprising results that went for or against a given hypothesis. That said, our main finding–that safety-net status was not associated with risk-adjusted episode spending for any of the 6 episode types–poses potential implications for policy and practice leaders. 

What are the possible real-world applications of these findings in clinical practice?

Recognizing that our analysis represents early work for a novel strategy (public reporting of episode-based spending), we identified several key implications.

First, our findings suggest that CEBP measures may not d
isadvantage safety-net hospitals against others from the perspective of improvement opportunities or improvement areas. In turn, quantifying and measuring episode-based spending, and then using it in the context of public reporting or other policies, may be a promising policy strategy going forward.

Second, as an important counterbalancing point, our findings do not imply that improvements will be similarly easy to attain for safety-net vs non–safety-net hospitals over time. Safety-net hospitals may still have more difficulty achieving improvements given baseline financial limitations and unique organizational challenges. Policy and practice leaders should still recognize and account for these factors in implementing policy strategies. 

Do you and your co-investigators intend to expand upon this research?

Yes. This analysis represents one installment of a broader portfolio in the Value & Systems Science Lab that tracks and evaluates policies related to episode-based payment and care. Promising directions for expanding this work include understanding episode-based spending for other clinical conditions and procedures; understanding how spending changes under different policy strategies (eg, value-based payment models, public reporting, others); and the unintended consequences of episode-based payment strategies on health care equity. This last focus area–the relationship between episode-based spending related policies and equity–is of particular importance to me and my collaborators, and one that we are pursuing through several large, multiyear grants and studies. 

About Dr Liao

Dr Liao is a board-certified internal medicine physician and the Medical Director of Payment Strategy at UW Medicine, where he is also an Associate Professor in the Department of Medicine within the UW School of Medicine and an Adjunct Associate Professor in the Department of Health Services within the UW School of Public Health. 

Dr Liao is Principal Scientist in the Value & Systems Science Lab, where his scholarship focuses on two related areas: policy initiatives that reform health care payment and delivery, and provider initiatives that use principles from behavioral science to drive performance in those reforms. He is a leading national expert in these areas, advising decision-makers on payment and delivery issues through service on the US Department of Health and Human Services' Physician-Focused Payment Model Technical Advisory Committee (PTAC) and work as an advisor to the national RVU Update Committee (RUC)–a national group that provides recommendations to Medicare about how to value physician work. 


Navathe AS, Zhou L, Liao JM. Hospital safety-net status and performance on publicly reported episode spending measures. Am J Manag Care. 2020;26(11):483-488. doi:10.37765/ajmc.2020.88527

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