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Final Value-Based Purchasing Rule Released

Posted May 11 2011 11:53pm

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.

kate-matos The Hospital VBP program marks a shift in CMS reforms, from “pay-for-reporting” to “pay-for-performance.”  In 2003, the Hospital Inpatient Quality Reporting (IQR) Program introduced the core-measures concept.  Hospitals that did not successfully report data under the IQR program were penalized by a 2.0 percentage point reduction in their applicable percentage increase .   The Hospital VBP program continues using payment incentives and takes the next logical step “ in promoting higher quality care for Medicare beneficiaries and transforming Medicare into an active purchaser of quality health care for its beneficiaries .”  The Hospital VBP program now directly ties payment amounts to a hospital’s performance score.  CMS will begin measuring hospital performance for incentive payments this July.

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 Hospitalist writes, “[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.”

As summarized by our very own Kate Greenwood:

[§ 3001(a)], which applies to patients discharged on or after October 1, 2012, establishes “value-based purchasing,” meaning that the government will make “value-based incentive payments” to hospitals that provide care to Medicare patients that meets or exceeds certain performance standards to be established by the Secretary of Health and Human Services.  Initially the standards must relate to at least the following five conditions: heart attack, heart failure, pneumonia, surgery, and healthcare-associated infections.  Eventually (by fiscal year 2014) the standards are to incorporate “efficiency measures,” that is Medicare spending per beneficiary must be a factor .

Beginning in FY 2013 (October 1, 2012), hospitals will receive incentive payments “ based on how well they perform on each measure or how much they improve their performance on each measure compared to their performance on the measure during a baseline performance period .”  The final rule adopts twelve clinical process of care measures and one patient experience measure, the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey.  These measures overlap or align with the Hospital Inpatient Quality Reporting (IQR) Program measures.

Acute Myocardial Infarction

AMI-7a Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival
AMI-8a Primary PCI Received Within 90 Minutes of Hospital Arrival

Heart Failure

HF-1 Discharge Instructions


PN-3b Blood Cultures Performed in the ED Prior to Initial Antibiotic Received in Hospital
PN-6 Initial Antibiotic Selection for CAP in Immunocompetent Patient

Healthcare-associated Infections

SCIP-Inf-1 Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision
SCIP-Inf-2 Prophylactic Antibiotic Selection for Surgical Patients
SCIP-Inf-3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time
SCIP-Inf-4 Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose

Surgical Care Improvement

SCIP-Card-2 Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker
During the Perioperative Period
SCIP-VTE-1 Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered
SCIP-VTE-2 Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis
Within 24 Hours Prior to Surgery to 24 Hours After Surgery

In FY 2014, CMS will add thirteen more measures.

Acute Myocardial Infarction

Mortality-30-AMI Acute Myocardial Infarction (AMI) 30-day Mortality Rate
Mortality-30-HF Heart Failure (HF) 30-day Mortality Rate
Mortality-30-PN Pneumonia (PN) 30-Day Mortality Rate

Hospital Acquired Condition Measures

Foreign Object Retained After Surgery
Air Embolism
Blood Incompatibility
Pressure Ulcer Stages III & IV
Falls and Trauma:  (Includes:  Fracture, Dislocation, Intracranial Injury,
Crushing Injury, Burn, Electric Shock)
Vascular Catheter-Associated Infections
Catheter-Associated Urinary Tract Infection (UTI)
Manifestations of Poor Glycemic Control

AHRQ Patient Safety Indicators (PSIs),
Inpatient Quality Indicators (IQIs), and Composite Measures

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.

The Total Performance Score (TPS) is calculated “ for each hospital by combining the greater of its achievement or improvement points on each measure to determine a score for each domain, multiplying each domain score by the proposed domain weight and adding the weighted scores together .”  In 2013, clinical measures will account for 70% of a hospital’s performance score and the HCAHPS survey for 30%.  Over time, scoring methodologies will be “weighted more heavily towards outcome, patient experience, and functional status 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 .

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