What Value-Based Purchasing Will Mean for Hospitals, Other Providers

CMS recently issued final rules for its value-based purchasing program for hospitals. Beginning in fiscal year 2013, which starts on Oct. 1, 2012, CMS will offer hospitals an incentive payment for achievement or improvement in 13 key measures. Here Susan Strzelczyk, a senior analyst at Sg2, discusses how the VBP system will work and how it is spreading to other payors and providers.

Roots of the trend. Value-based purchasing, which used to be called pay-for-performance, has been in planning for a long time. "Pay-for-performance was something that CMS and MedPAC were talking about for years," Ms. Strzelczyk says. It started in demo projects and now it will be applied to all hospitals.


Incentive payments. "Hospitals will lose part of their annual increase but get the chance to earn it back," Ms. Strzelczyk says. The incentive payments will be funded by a 1 percent decrease in base operating DRG payments, starting in fiscal year 2013, and then increase to 2 percent in fiscal year 2017.


Measures involved. The program's 13 measures are divided between clinical process of care, weighted at 70 percent of the payment, and patient experience of care, weighted at 30 percent. Clinical process of care covers 12 performance measures focused on acute myocardial infarction, heart failure, pneumonia, healthcare-associated infections and surgical care. Patient experience of care focuses on a Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) score, which is based on eight different components. Ms. Strzelczyk says some hospitals are concerned that HCAHPS measures have too much weight. "People say there is a lot of variability in HCAHPS scores," she says. "Urban hospitals are also concerned about the huge diversity among urban populations."


Calculating the score. "Basically, the hospital will be scored on both its achievement and improvement during a performance period," Ms. Strzelczyk says. To determine each hospital's incentive payment, CMS will calculate its total performance for each measure during a baseline period from July 1, 2009 to March 31, 2010. Those measures will then be compared to a performance period lasting from July 1, 2011 through March 31, 2012. Scores are combined within each domain and each measure will be given equal weight.


How hospitals can prepare. "Hospitals can examine their performance right now," Ms. Strzelczyk says. The measures are included in CMS' core measures, which have been available since 2007. "Private companies have tools to manage this information," she says. "There are a number of programs that would be good for hospitals to target, such as pneumonia."


More providers may be added. "Value-based purchasing is not simply for hospitals," Ms. Strzelczyk says. Congress is considering legislation that would extend VBP to ambulatory surgery centers. In the future, home health agencies, physician offices and other parts of hospital-owned networks of services may also be added. "It would be wise of these other groups to start researching the measures," she says. "I think it's just a matter of time."


VBP and ACOs, bundled payments. ACOs will be measured on 65 quality measures. Some ACO measures are similar to VBP, such as patient experience of care, but others are quite different, such as care coordination and preventive health. CMS' bundled payment pilots also measure quality, but over episodes of care. "When, for instance, you're measuring quality in bundled payments, you have to measure it throughout the episode," Ms. Strzelczyk says.  "But there is nothing to indicate that VBP will go across the episode."


Private payors' measures. Private payors are starting VBP-like systems. For example, WellPoint recently announced it will begin tying hospital reimbursement increases to quality measurements through its Blue Cross Blue Shield plans in 14 states. Terms of the program will be introduced in the company's next contract negotiations with each provider. WellPoint's weighting percentages are different from the Medicare program. "There is a lot more weight put on health outcomes than on patient satisfaction," Ms. Strzelczyk says. WellPoint plans to weight 55 percent of the payment on health outcomes, 35 percent on meeting patient safety measures and 10 percent patient satisfaction. The incentive for the hospital will be to get an increase in reimbursement every year, which in the past has amounted to 8 percent a year. "The hospital has to earn that money back," she says.


Learn more about Sg2.


Related Articles on Value-Based Purchasing:

WellPoint Will Tie Payment to Quality for Hospitals in 14 States

CMS Issues Final Rule for Value-Based Purchasing Program

Upcoming ASC Legislation Adopts Elements of ACO Model, Hospital Value-Based Purchasing



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