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.