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Health Reform’s Value-Based Purchasing Provisions

Posted Feb 28 2011 10:42am

The Affordable Care Act of 2010 includes a number of provisions to study and/or implement value-based purchasing (VBP) programs in the United States’ health care system.  These provisions target Medicare payment policies in particular.  Today I review a Robert Wood Johnson (RWJ) article which provides an overview of the ACA provisions related to VBP.

There are four Sections of the ACA which I will focus on: Section 3022, 3007, 3013, and 3021.  Let’s get to it.

  • Section 3022 calls for a Medicare Shared Savings Program, which would provide payments specifically for new accountable care organizations. The legislation specifically requires measurement and assessment of quality as reflected in clinical processes and outcomes, patient and caregiver experience with care, and utilization reflecting efficiency and effectiveness of care, such as hospital admissions for ambulatory care sensitive conditions.

The House also asked the Institute of Medicine (IOM) to study the value issue in two ways. First, the IOM would conduct a study that would explore whether Medicare‘s current geographic payment adjustments for the prices paid to physicians and hospitals, which are designed to reflect differences in input prices, are accurate and to propose specific improvements, if any.  At Acumen, I am currently working on designing an alternative approach to calculating geographic payment adjustments for hospitals .   Second, and broader in scope, the IOM would conduct a companion study on geographic variations in the volume and intensity of services and recommend how to incorporate “quality and value” metrics into Medicare payment systems.

Because much of the House health reform bill‘s language was lost when Congress decided to use the Senate bill as the basis for final legislation, permitting only a few House amendments to be brought as part of reconciliation bill amendments, the House compromise was not included in the Affordable Care Act. Subsequently, the secretary of the Department of Health and Human Services (HHS), Kathleen Sebelius, committed in writing to congressional members of the Quality Care Coalition (members representing lower-spending districts) that she would commission the IOM study as called for by the House. Recently, the IOM announced formation of the study panel, which has already begun  meeting.

The Affordable Care Act includes a Senate provision that would pay for individual physician services based on a “value index” assigned to physicians according to their quality and costs:

  • Section 3007 creates a new “value-based payment modifier,” which, starting in 2015, will be used to provide differential payments based on quality and cost of care. Since the payment adjustments are to be budget neutral, some physicians would receive bonuses and others penalties under this provision. Presumably, the IOM‘s study will be influential in determining how CMS might apply a value-based payment modifier.

I am also is also working on this project, evaluating whether episode grouping software can be used to evaluate physician cost efficiency levels.  Previous reports I have worked on are available  here .  Further, the Act continues to advance the notion of bringing value into payments made to physicians, hospitals, and other providers through established payment mechanisms:

  • Section 3013 provides for the identification of gaps in quality measures and authorizes (but does not appropriate) funding intended to fill those gaps, relying on collaboration between CMS, the Agency for Healthcare Research and Quality (AHRQ) and the National Quality Forum, which will be primarily responsible for identifying the measure gaps. Priorities are to be given to the following areas: i)  health outcomes; ii)  functional status; iii) coordination of care; iv) meaningful use of health IT; v) safety; vi) patient experience; vii) efficiency; and viii) disparities.

The RWJ article continues, “While this work proceeds, the current pay-for-reporting and pay-forperformance programs—labeled as value-based purchasing—for physicians and hospitals will be extended and expanded. The most advanced is the program for hospitals; FY 2013 measures will include measures for five conditions and patient experience as measured by the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS). FY 2014 will include measures of efficiency.”

  • Section 3021 creates a Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services to test payment and service delivery models that reduce costs while preserving or enhancing the quality of care provided under Medicare, Medicaid, and CHIP, and funds it at $10 billion every 10 years. The legislation specifically suggests pursuing models that transition providers away from fee-for-service and toward comprehensive pay

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