On April 29, the Department for Health & Human Services (HHS) announced the launch of the Hospital Inpatient Value-Based Purchasing (Hospital VBP) program under the Medicare Inpatient Prospective Payment System (IPPS). According to HHS, the Hospital HVP program “marks the beginning of an historic change in how Medicare pays health care providers and facilities-for the first time, 3,500 hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide.”
As a part of the launch of the Hospital VBP program, authorized under § 3001(a) of the Patient Protection and Accountable Care Act of 2010 (ACA, codified at 42 U.S.C. § 1886(o)), the Centers for Medicare & Medicaid Services published the final rule outlining the measures, performance standards, scoring methodology, and methodology for translating hospitals’ Total Performance Scores into value-based incentive payments.
One in seven Medicare patients will experience some “adverse” event such as a preventable illness or injury while in the hospital. One in three Medicare beneficiaries who leave the hospital today will be back in the hospital within a month. Every year, as many as 98,000 Americans die from errors in hospital care.
In addition to adding to the suffering of patients and their caregivers, these errors lead to significant unnecessary health care spending. Medicare spent an estimated $4.4 billion in 2009 to care for patients who had been harmed in the hospital, and readmissions cost Medicare another $26 billion.
To fund the Hospital VBP incentive program, CMS will reduce the base operating diagnosis-related group (DRG) payment by 1% in FY 2013 and increase withholding by 0.25% each year until it peaks at 2% in FY 2017. As a result, approximately $850 million will be allocated for the Hospital VBP program in FY 2013. Since overall Medicare spending for inpatient stays at acute care hospitals will remain constant, the new payment scheme will benefit some hospitals and hurt others. As the Hospitalistwrites, “[i]t’s also a zero-sum game. That means there will be winners and losers, with the entire cost-neutral program funded by extracting money from the worst performers to financially reward the best.”
Complication/patient safety for selected indicators (composite)
Mortality for selected medical conditions (composite)
Hospitals will be scored according to achievement (compared to all other hospitals) and improvement (over each hospital’s baseline) for each applicable measure. Achievement points will be awarded if the hospitals performance during the measurement period (quarterly) exceeds the 50th percentile of hospitals measured during the baseline period (the “threshold”). Improvement points will be awarded to the extent that a hospital’s current performance exceeds baseline period performance.
Baseline scores for improvement measurement have already been set, during the period from July 1, 2009 to June 30, 2010. The FY 2013 performance period for clinical process of care measures will be July 1, 2011 through March 31, 2012. July 1, 2011 will also mark the beginning of a 12-month performance period for the FY 2014 30-day mortality measures.
Moving forward, CMS will implement other ACA provisions designed to improve care and reduce costs. For instance, hospitals will begin receiving reduced payments in FY 2015 if they are unable to prevent certain hospital acquired infections or if the hospital fails to “meaningfully use information technology to communicate within the hospital to deliver better, safer, more coordinated care.” Check prior posts to learn more about HITECH’s “Meaningful Use” Rule .