January 2011
Medicare Proposes New Hospital
Value-Based Purchasing Program
n January 7, 2011, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule regarding Medicare’s Value Based Purchasing (VBP) Program to reward hospitals for providing high quality, safe patient care. CMS Administrator Donald Berwick, M.D., explains that the new VBP Program will make the “inevitable leap” from the current state of fee-for-service reimbursement to a payment system that rewards only high-quality care. CMS considers VBP a step in completing the transition of Medicare from a passive payer for services to an active purchaser of
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www.polsinelli.com What Hospitals Should Do
Now 2 About the Proposed Rule 3
only high quality care. The VBP Program, which was mandated by the Affordable Care Act of 2010, will apply to Medicare payments under the Inpatient Prospective Payment System beginning in October 2012 and will affect more than 3,000 acute care hospitals. CMS estimates that hospital payments resulting from this proposed rule will reduce Diagnosis -Related Group (DRG) payments for the lowest-scoring hospitals, but should result in an increase in DRG payment for the highest-scoring hospitals. Thus, if the proposed rule becomes final, high performing hospitals have the opportunity to increase their
reimbursement, which can be a financial boon to many hospitals.
Hospitals must act now if they wish to have the greatest chance at reimbursement under the VBP program. Payments under the program will be based upon a comparison of each hospital’s performance period against its comparative period. Under the proposed rule, a hospital’s baseline performance is already established, and is based upon the hospital’s performance from July 1, 2009 through January 1, 2010. More importantly, the proposed performance period for purposes of calculating a hospital’s FY2013 reimbursement would begin on July 1, 2011, which is less than six months away.
Information needed to calculate a hospital’s estimated performance under the VBP Program currently is available in the proposed rule http://www.ofr.gov/ inspection.aspx#special and on CMS’ Hospital Compare website at http:// www.hospitalcompare.hhs.gov/. These data can be used to calculate a hospital’s likely performance under VBP. With this information in hand, hospitals can and should act now to implement changes to improve performance before the actual measurement period begins on July 1, 2011.
What Hospitals Should Do
Now
Calculate the hospital's estimated performance based on data in the proposed Rule related to 2008, even though the Comparative Period to be used by CMS will be based on 2009 data
Start focusing on the proposed 17 clinical process of care measures in order to increase the hospital’s prospect for better performance under the VBP
Evaluate and improve current physician alignment strategies to maximize performance
Review the hospital’s processes to ensure that all associated data is accurate and verifiable
Submit comments if the hospital wishes changes to the proposed rule
About the Proposed Rule
This VBP program is one of many CMS programs designed to forge a connection between Medicare’s payment
system and improvements in health care efficiency, quality and safety. Under the Affordable Care Act, CMS was tasked to begin the VBP Program in FY2013, changing hospital payments for inpatient discharges occurring on or after October 1, 2012. Under the proposed rule, a hospital’s value-based payment will be value-based on demonstrated performance on clinical quality and patient satisfaction measures during a period commencing on July 1, 2011 (Performance Period) as compared to the hospital’s performance during a similar period commencing on July 1, 2009 (Comparison Period). The financial incentives will be funded by a one percent reduction in the base operating DRG payments starting in FY 2013, rising to two percent by FY2017. If the proposal rule becomes final, a high-performing hospital will have the opportunity to recover more than the amount withheld from its base payment, making the VPB Program a financial boon to high performing hospitals.
For the FY2013 Hospital VBP program, CMS proposes to use 17 “clinical process of care” measures in five health categories which include: acute myocardial infarction, heart failure, pneumonia, healthcare associated infections, surgical care improvement, and eight additional measures from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey that document patients’ experience of care. These measures are not new to hospitals, as they have already been reporting these measures as part of the Hospital Inpatient Quality Reporting Program (Hospital IQR). For the FY2014 VBP Program, CMS proposes to adopt additional measures that will include three mortality outcome measures, eight Hospital Acquired Condition (HAC) measures, and nine measures from the Agency for Healthcare Research and Quality (AHRQ).
Under the proposed VBP Program, CMS will score each hospital based on both the hospital’s achievement based on national measures and on the hospital’s improvement as against the hospital’s own base line performance. These scores are measured by evaluating the hospital’s performance during the Performance Period and comparing them to the same measures during the Comparative Period.
The achievement measures compare a hospital’s performance on each
of the quality and patient satisfaction indicators during the Performance Period against national benchmark performance (defined as the median performance by top decile hospitals during the Comparative Period), as long as the hospital’s performance exceeds the applicable threshold measure (defined as the median performance of all hospitals during the Comparative Period). Although the precise threshold measures are not yet known for the Comparative Period beginning July 1, 2009 that will be used for purposes of FY2013 reimbursement, the threshold data is known for a similar comparative period one year earlier, i.e. commencing July 1, 2008 and these threshold metrics are set forth in the proposed rule. http:// www.ofr.gov/inspection.aspx#special. The benchmark measures for each of the quality and patient satisfaction indicators for the Comparative Period can be obtained from Hospital Compare. http:// www.hospitalcompare.hhs.gov/. Thus, hospitals now can estimate their likely achievement performance based on a 2008 comparative period.
As stated above, under the proposed rule, a hospital’s performance for purposes of calculating its VBP payment, for each of the measures, will be based on the higher of its achievement score or its improvement score during the performance period. The improvement score is calculated by comparing the hospital’s actual
performance during the Comparative Period to its actual performance during the corresponding Performance Period commencing July 1, 2011.
Under the proposed rule, the measures are further divided into three domains (only two domains apply to FY2013), which then can be weighted by CMS based on its policy goals for the applicable Performance Period. The domains include a clinical process of care domain which, for FY2013, includes the 17 clinical process of care measures; a patient experience of care domain, which, for FY2013, includes the eight dimensions that address patient satisfaction; and an outcome measure domain which does not apply to FY 2013 but, for FY 2014, will include the three mortality outcome measures, eight HAC measures, and nine measures from the AHRQ. CMS proposes to weight the FY2013 domains, 70 percent for clinical process of care and 30 percent for patient experience of care. CMS will calculate a Total Performance Score (TPS) for each hospital by combining the hospital’s scores on each of the measures within each domain, multiplying the score on each domain by the proposed weight for the domain, and adding the weighted scores for the domains. Each hospital’s TPS would then be translated into a value-based incentive payment using a linear exchange function, which provides the same marginal incentives to both lower-and
higher-performing hospitals.
The proposed VBP Program rule raises several implications for hospitals. In addition to the recommendation that each hospital calculate now its estimated score based on currently known data, we think it is imperative that hospitals re-energize their work with physicians to engage them in the work necessary to drive improved hospital performance. Without physician support and assistance, hospitals will face significant challenges in performing well under the VBP Program. Thus, we believe hospitals and physicians should begin now to evaluate and implement those physician/hospital alignment strategies to assure optimal performance under the VBP Program that starts July 1, 2011.
We also recommend that hospitals be prepared to demonstrate the accuracy of
their reporting processes. Under the 2011 OIG Work Plan, the OIG has announced a priority to review hospital controls for ensuring the accuracy of data related to the quality of care that they submit to CMS for Medicare reimbursement. Thus, hospitals would be well advised to review and improve their reporting processes to be sure that the data reported to CMS is accurate and complete.
Finally, hospitals should
immediately determine if they wish to submit comments to CMS related to the proposed VBP rule prior to March 8, 2010, the comment period deadline.
The proposed rule is placed on display at the Federal Register and can be found under Special Filings at: http:// www.ofr.gov/inspection.aspx#special.
For More Information
If you would like to discuss the implications of the new proposed rule, please contact: Janice Anderson, 312.873.3623, or janderson@polsinelli.com
Alan Parver, 202.626.8306, or aparver@polsinelli.com
Matthew J. Murer
Practice Area Chair Chicago
312.873.3603
mmurer@polsinelli.com
Randal L. Schultz,
Practice Area Vice-Chair Kansas City
816.374.0521
rschultz@polsinelli.com
Alan K. Parver,
Practice Area Vice-Chair Washington, D.C. 202.626.8306 aparver@polsinelli.com Janice A. Anderson Chicago 312.873.3623 janderson@polsinelli.com Douglas K. Anning Kansas City 816.360.4188 danning@polsinelli.com Cynthia E. Berry, Washington, D.C. 202.626.8333 ceberry@polsinelli.com
Mary Beth Blake, Kansas City 816.360.4284 mblake@polsinelli.com Tina M. Boschert, Kansas City 816.360.4118 tboschert@polsinelli.com Gerald W. Brenneman, Kansas City 816.360.4221 gbrenneman@polsinelli.com Teresa A. Brooks Washington, D.C. 202.626.8304 tbrooks@polsinelli.com Jared O. Brooner St. Joseph 816.364.2117 jbrooner@polsinelli.com Anne M. Cooper Chicago 312.873.3606 acooper@polsinelli.com Meredith A. Duncan Chicago 312.873.3602 mduncan@polsinelli.com Fredric J. Entin Chicago 312.873.3601 fentin@polsinelli.com Kara M. Friedman Chicago 312.873.3639 kfriedman@polsinelli.com Rebecca L. Frigy St. Louis 314.889.7013 rfrigy@polsinelli.com Randy S. Gerber St. Louis 314.889.7038 rgerber@polsinelli.com Jay M. Howard Kansas City 816.360.4202 jhoward@polsinelli.com
George Jackson, III Chicago 312.873.3657 gjackson@polsinelli.com Joan B. Killgore St. Louis 314.889.7008 jkillgore@polsinelli.com Jason T. Lundy Chicago 312.873.3604 jlundy@polsinelli.com Patrick J. Martinez Chicago 312.873.3677 pmartinez@polsinelli.com Jane K. McCahill Chicago 312.873.3607 jmccahill@polsinelli.com Edward F. Novak Phoenix 602.650.2020 enovak@polsinelli.com Thomas P. O’Donnell Kansas City 816.360.4173 todonnell@polsinelli.com Daniel S. Reinberg Chicago 312.873.3636 dreinberg@polsinelli.com Charles P. Sheets Chicago 312.873.3605 csheets@polsinelli.com Heidi R. Slaw Chicago 312.873.3658 hslaw@polsinelli.com Kathryn M. Stalmack Chicago 312.873.3608 kstalmack@polsinelli.com
Leah Mendelsohn Stone Washington, D.C. 202.626.8329 lstone@polsinelli.com Chad C. Stout Kansas City 816.572.4479 cstout@polsinelli.com Steven K. Stranne Washington, D.C. 202.626.8313 sstranne@polsinelli.com Emily C. Tremmel Chicago 312.873.3661 etremmel@polsinelli.com Andrew B. Turk Phoenix 602.650.2097 abturk@polsinelli.com Kimela R. West Kansas City 816.360.4330 kwest@polsinelli.com Christopher K. Wilson Kansas City 816.395.0647 cwilson@polsinelli.com Mark R. Woodbury St. Joseph 816.364.2117 mwoodbury@polsinelli.com
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