Healthcare Integration Advisors - Overcoming Obstacles Along the Continuum of Care

On October 1, 2012, the Centers for Medicare and Medicaid Services (CMS) implemented two long-anticipated programs under the Affordable Care Act of 2010 (ACA): the Hospital Value-Based Purchasing Program (VBP), and the Hospital Readmissions Reduction Program (RRP). 

Hospital Value-Based Purchasing Program

The VBP was initiated by CMS to reward “acute-care hospitals with incentive payments for the quality of care they provide to people with Medicare.”  The program applies to all hospitals, except psychiatric hospitals, rehabilitation hospitals, children’s hospitals, long term care hospitals, and certain cancer and research facilities. The program also excludes hospitals subject to payment reductions under Hospital IQR; hospitals cited for deficiencies during the performance period that pose immediate jeopardy to the health or safety of patients; and hospitals that do not meet minimum requirements of cases, measures, or surveys during the performance period. The program will pay incentives based upon a score weighted 70% on the quality of performance, measured by a set of standard clinical quality measurements (Clinical Process of Care measurements), and 30% on patient experience surveys (Patient Experience of Care dimensions). The hospital’s score will be measured against either achievement or improvement, whichever is higher. The “achievement” calculation measures a hospital against all other hospitals’ baseline period performance scores, while the “improvement” score measures a hospital’s current score against its own baseline period performance score.  Under this program, patient experience is a key component of a hospital’s score, so establishing action plans that will maximize patient experience should be a focus for hospitals wishing to maximize incentive payments under the program.

As of October 1, 2012 (the start of the 2013 Federal fiscal year), hospitals will begin to receive payments under the program based on their performance during the period from July 1, 2011, to March 31, 2012.   Hospitals participating in VBP will have their base operating DRG payments for each patient discharge reduced by a percentage each year, beginning with a 1% reduction for the 2013 fiscal year. However, under VBP, a hospital that meets the performance standards set by CMS will recover a portion of the withheld payments through receipt of the incentive payments, and can even receive funds in excess of the reduction depending on the amount of incentives received.

It is too early to tell what effect the VBP program will have on a hospital’s bottom line, and studies indicate that the program may have little effect at all, but hospitals should pay attention to the guidelines as other commercial reimbursement models may be moving towards this system.  Hospitals with an active MyQualityNet account can review their 2013 Estimated Percentage Payment Summary Report at http://www.qualitynet.org.

Hospital Readmissions Reduction Program

RRP requires CMS to reduce payments to hospitals with excessive readmissions following discharge. Under this program, CMS will withhold up to 1% of a hospital’s base operating DRG payments. The program penalizes hospitals whose rates of Medicare readmissions within thirty days of discharge are higher than the national averages. This program will apply to three measures in the 2013 Federal fiscal year (heart attack, heart failure, and pneumonia) and will expand to include COPD, CABG, PTCA, and certain other vascular conditions in the 2015 Federal fiscal year.

RRP has the potential to impose stiff penalties on hospitals.  The government has announced that two-thirds of the hospitals serving Medicare patients - approximately 2,200 facilities - will be assessed penalties averaging around $125,000 per facility this coming year. The penalties under the program will rise to 3% by 2015.

Hospitals are often helpless to control what happens when a patient leaves the hospital.  To avoid penalties under this program, hospitals will need to increase their focus on discharge planning and work closely with other health care and social service providers to ensure appropriate follow-up care for the patient once they leave the hospital.

Last week, 13 New York State agencies, including the Department of Health, released proposed regulations designed to implement the Executive Order issued earlier this year by Governor Andrew Cuomo to limit executive compensation and administrative expenses at service providers that receive State funds or State-authorized payments of federal funds.  The proposed regulations are available for public comment from May 30 until July 16.

In their present form, the proposed regulations apply to providers that receive more than $500,000 and at least 30% of their annual funding from the State.  These limits would include the Federal as well as the State portion of Medicaid payments.  The regulations purport to prevent providers from spending more than $199,000 in State funds for the compensation of an executive. If a provider chooses to pay an executive more than $199,000 from other sources, the provider must keep compensation below the top 25% in the field as determined by a compensation survey identified or recognized by the applicable State agency.  The compensation limit includes cash and noncash benefits, such as wages, bonuses, housing, cars, below-market loans, educational benefits, family travel, and use of an organization’s property.  Mandatory benefits, such as health insurance premiums and pension contributions, are excluded.   

In addition, providers that pay an executive more than $199,000 must have the compensation approved by their boards of directors, including at least two independent directors, and must have performed a review of comparability data.  In cases where competitive imperatives or the complexity of a provider's operations require compensation that exceeds the limits, and in other specified circumstances, providers may apply for a waiver of the compensation limit.

Taking a page from the Affordable Care Act’s limit on health insurers’ overhead expenses, the proposed regulations would also require that at least 75% of a provider's State funds be utilized for program services rather than administrative costs. This percentage will increase by 5% each year until it reaches 85% in 2015.  Capital expenses are not affected by this restriction and waivers would be available in certain circumstances.

The proposed regulations further mandate that providers annually report the public funds they have received, the compensation of their executives and highest-paid employees, and their administrative expenses.  This information would be submitted electronically, using a State-wide form.

Sanctions for non-compliance would include (i) redirection of State funds,  (ii) suspension, limitation, or revocation of the provider’s license to operate/deliver program services, and (iii) suspension, limitation, or revocation of contracts between the State and the provider.

The press release from the Governor’s office, along with a link to the proposed regulations from the Department of Health, can be found here.  We will provide further guidance as these regulations are finalized.

HIPAA audits are coming, but significant HIPAA enforcement is occurring now.  The Office of Civil Rights (OCR) of the U. S. Department of Health and Human Services (HHS) recently awarded  KPMG a $9.2 million contract to conduct HIPAA audits on 150 covered entities and business associates before December 31, 2012.   Booz Allen Hamilton was contracted  to identify HIPAA audit candidates.  An increasing level of enforcement has already been observed (check out “All Signs Point to Ramped-Up HIPAA Enforcement”) and even more enforcement activity is expected as a result of the planned audits. 

The OCR announced its most recent enforcement action on July 7, 2011, a Resolution Agreement and Corrective Action Plan (Plan) with the University of California at Los Angeles Health System to settle violations of the HIPAA Privacy and Security Rules.  OCR found that hospital employees had accessed and reviewed electronic protected health information of celebrity patients repeatedly and without a permissible reason.

The Plan provides for an independent monitor, implementation of updated policies, procedures, and training, but with a significant downside: if the Plan is breached, HHS may impose a civil monetary penalty for the HIPAA breaches.

The takeaway for covered entities and business associates subject to HIPAA is to consider the Plan as a form of “best practices” to use to implement a customized HIPAA compliance program.  It is particularly important for entities to update and actually roll out, train, and enforce their policies and procedures.  Current HIPAA programs are more likely to be based on safeguarding paper medical records and not on properly handling electronic protected health information (PHI) if they have not recently been revised.  In particular, the following concrete steps required by the Plan should be considered for addition to entity HIPAA programs:

• Update policies and distribute to anyone in the workforce who has access to PHI along with written or electronic compliance certification that the policies have been read and understood, without which employees may not perform services that involve PHI;
• Policies must address permissible and impermissible use and disclosure of PHI,  information access standards, and sanctions;
• Train workforce to comply with policies, through updated annual training as appropriate, including written certification that training has been received, without which employees may not have access to PHI;
• Investigate and respond to non-compliance; and
• Officer accountability for training and certification of training.

These are practical steps to follow and would serve well in the event of any future HIPAA audit. KPMG has been tasked, in its conduct of HIPAA audits, to visit the entity, interview leadership, examine operations, assess whether policies are being implemented and HIPAA standards are being met, and make recommendations for corrective action going forward.   It is not clear how the OCR will respond to negative audit findings, but it is not sensible to wait for the shoe to drop.  Providers should take a good hard look at their HIPAA privacy and security polices, update them particularly with regard to their current electronic health records operations, then implement them carefully and with appropriate documentation.

The American Hospital Association (“AHA”) issued its second report in its series examining anti-trust issues in the pricing for hospital services.  The first study rebutted claims made in two widely-cited publications that found links between higher hospital prices to insurers and market power.  The second study examined hospital financial data to determine what factors best explained price differences across hospitals.

The study makes the following points:

• Hospital expenditures have held steady at approximately 30% of total healthcare expenditures in the U.S. during the period 2001 – 2009.  Home health care expenditures have increased as a share of the total during the same period.  The other categories that have grown faster than hospital care are prescription drugs, program administration and the net cost of private health insurance.
• Nationwide, Medicare and Medicaid admissions now account for more than 60% of total admissions.  AHA estimates that the Medicare payment-to-cost ratios fell from 99.1% in 2000 to 90.1% in 2009; Medicaid payment-to-cost ratios fell from 94.5% in 2000 to 89% in 2009; and uncompensated care now represents approximately 6% of total hospital expenses.
• Total hospital admissions grew by 7% between 2000 and 2009, but have been relatively flat since 2004,  due in part to the shift in services to outpatient environments.  Outpatient visits increased 23% between 2000 and 2009.

Using Medicare cost report data from 2004 through 2008, the AHA researchers were able to develop a number of models that they believe explain the price differences across hospitals.  The key explanatory variables are case mix, teaching intensity, share of Medicare and Medicaid discharges, regional costs (wage index), hospital investment in capital, resource utilization and characteristics of the patient population.  One of the models was able to explain 72% of the price variation in commercial payors, and 83% in all payors.

The AHA study explains something we have observed in our practice; that academic medical centers are able to charge payors more for their services.  In the AHA model, the explanation for the higher price difference is due not to the market power of the academic medical center, but the fact that it has a greater teaching intensity, higher wage costs, greater investment in capital and attracts a sicker patient demographic.

Although the researchers were not able to explain all of the price differences, they are able to explain a statistically significant amount.  The AHA study takes issue with the conclusion of some researchers that any residual price variation not captured by the model is due to market power.

The Centers for Medicare & Medicaid Services published a proposed rule on January 13, 2011 outlining the proposed Hospital Value-Based Purchasing Program (Hospital VBP Program) mandated by Section 3001(a) of the Patient Protection and Affordable Care Act (PPACA). 

Although the Hospital VBP Program is not effective until October 1, 2012, Medicare hospitals must act now to ensure that they are eligible for incentive payments under the program as the initial performance period begins July 1, 2011.

Background

CMS is required to establish a Hospital VBP Program that provides meaningful incentives to improve the quality of the care that Medicare hospitals provide. The program must be in place by Fiscal Year 2013 (October 1, 2012). The incentive payments are funded by a one percent reduction in hospital DRG payments beginning in Fiscal Year 2013. 

CMS views the Hospital VBP program as a natural outgrowth to the collection of hospital quality data that was originally mandated in the Medicare Prescription Drug Improvement and Modernization Act of 2003, as modified by the Deficit Reduction Act of 2005. This program is known as the Medicare Hospital Inpatient Quality Reporting Program (Hospital IQR Program).

Proposed Measures

PPACA requires that the proposed measures for the Hospital VBP Program be measures that are currently used in the Hospital IQR Program.  CMS has adopted 45 measures in the Hospital IQR program.  Of these measures, 27 are chart-abstracted process of care measures that assess the quality of care furnished by hospitals in connection with treatment of acute myocardial infarction, heart failure, pneumonia, and surgical care improvement.  Fifteen of the measures are claims-based measures that assess the quality of care furnished by hospitals as measured by 30-day mortality and 30-day readmission rates.  Three of the measures are structural measures that assess hospital participation in cardiac surgery, stroke care, and nursing sensitive care systemic databases.   The final measure is the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey. 

CMS may not select readmission measures or any measures that have been included in the Hospital IQR program for less than one year prior to the beginning of the performance period

Applying this criteria, there are twenty-nine initial eligible measures for the Fiscal Year 2013 Hospital VBP Program.  Initially, CMS proposes to include only seventeen of these twenty-nine measures.  It excluded measures that they consider to be “topped out,” meaning all but a few hospitals have achieved a similar high level of performance on them.  They also excluded some measures that they intend to retire in the future.

CMS is proposing to add measures to the Hospital VBP Program in the future by implementing a “sub-regulatory process”.  Under this process, CMS can add any measure to the Hospital VBP Program if that measure is adopted under the Hospital IQR Program and has been included on the Hospital Compare Website for at least one year.  The performance period for new measures would start exactly one year after the date these measures are publicly posted on the Hospital Compare Website.  There is some question whether this sub-regulatory process meets the requirements of the Administrative Procedures Act. 

Proposed Performance Period

CMS is proposing a three quarter performance period from July 1, 2011 through March 31, 2012 for the clinical process of care and HCAHPS measures.  The hospitals performance on these measures will be compared to a three quarter baseline period of July 1, 2009 through March 31, 2010.  For the outcome, claims-based measures, CMS is proposing to use an eighteen month performance period from July 1, 2011 to December 31, 2012.  The baseline period would be July 1, 2008 to December 31, 2009.

Proposed Performance Standards

PPACA requires that the performance standards include levels of achievement and improvement and must be established and announced not later than sixty days prior to the beginning of the performance period. CMS is proposing to set the achievement performance standard for each proposed measure at the median (50^th percentile) of hospital performance during the relevant baseline period (either July 1, 2009 through March 31, 2010 or July 1, 2008 to December 31, 2009).  Hospitals would receive achievement points only if they exceed the achievement performance standard and could increase their achievement score if they receive a higher level of performance.  The improvement standard would be based on each specific hospital’s performance on the measure during the performance period as compared to the baseline period.

Expected Impact on Payments

CMS anticipates that the percent increase in payments to a hospital participating in the Hospital VBP Program will range from 0.0236% for the lowest scoring hospital to 1.817% for the highest scoring hospital.  This means that when the one percent reduction in hospital DRG payments is taken into account, roughly one-half of the participating hospitals will receive a net increase of payments and one-half will receive a net decrease in payments.  No participating hospital will receive more than a net one percent increase or decrease in payments.

Late last week the House of Representatives passed, with virtually no opposition, legislation that postpones the implementation of the Medicare physician pay cut through the end of 2011. Exactly the same Bill has already been passed by the Senate and should be on President Obama’s desk for signature.

The physician pay cuts would have amounted to 25% as of January 1, 2011 had this Bill not been passed. It is hoped that, with this one year extension, Congress will work out a permanent solution for the physician reimbursement rates.

President Obama is expected to sign the Bill.

The FTC, OIG, and CMS hosted an all-day workshop on Accountable Care Organizations on October 5^th. So what did they talk about and what did we learn?

There are a couple of good posts that you should read for a first-hand account.  Beth Graham at Karl Bayer provides a concise summary of the day's events. David Harlow at HealthBlawg also makes some cogent comments and raises the key question on everyone's mind: is this just managed care on steroids?  

Daniel R. Levinson, Inspector General of the Department of Health & Human Services has also made his opening remarks available.

Although I could not attend the workshop, I created a Wordle using the contents of the blog posts and Inspector Levin's remarks. So what are ACOs about: savings and quality. If only words were enough.

The Federal Trade Commission, Centers for Medicare & Medicaid Services (CMS), and the Office of the Inspector General will host a workshop on accountable care organizations (ACOs) on October 5, 2010. The workshop will be held at CMS headquarters in Baltimore, MD from 9 am to 4:30 pm.

According to the September 17 notice in the Federal Register, the workshop will include panel discussions on the legal issues related to ACOs, including the antitrust, Stark, and anti-kickback laws.  Interested persons can attend in person or by teleconference.

The first panel will discuss whether independent providers in an ACO should be allowed to engage in joint price negotiations with private payers, and if so, under what circumstances. The second panel will discuss ways to encourage the formation of multiple ACOs in a given geographic market. The third panel will discuss how ACOs will interact with the Stark law, the anti-kickback statute and the civil monetary penalties law. The agencies are also seeking written comments and statements on these topics from the public.

 A key topic of discussion will be whether the Secretary of HHS should use her authority under PPACA to waive the legal requirements that would normally apply to health care providers and whether such waivers should be broad or narrow to accomplish the goal of encouraging the formation of ACOs.