Proposed CMS Rule Ties Incentives to Quality Measures

Under the new proposed incentives for value-based purchasing, hospitals that perform well on quality measures would receive higher payments.

The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule to establish a new hospital value-based purchasing program that would reward hospitals for providing high quality, safe care for patients. Under the program, hospitals that perform well on quality measures relating both to clinical process of care and to patient experience of care, or those making improvements in their performance on those measures, would receive higher payments under the program.

The proposal, according to CMS Administrator Donald Berwick, MD, marks “a huge leap forward in improving the quality and safety of America’s hospitals for both Medicare beneficiaries and all Americans. The hospital value-based purchasing program will reward hospitals for improving patients’ experiences of care, while making care safer by reducing medical mistakes,” he said in a statement.

The hospital value-based purchasing program, which would apply beginning in FY 2013 to payments for discharges occurring on or after October 1, 2012, would make value-based incentive payments to acute care hospitals, based either on how well the hospitals perform on certain quality measures or how much the hospitals’ performance improves on certain quality measures from their performance during a baseline period. The higher a hospital’s performance or improvement during the performance period for a fiscal year, the higher the hospital’s value-based incentive payment for the fiscal year would be.

The program, which was required by the Affordable Care Act, would apply to Medicare payments under the Inpatient Prospective Payment System (IPPS) for inpatient stays in more than 3,000 acute care hospitals. The financial incentives would be funded by a reduction in the base operating DRG payments for each discharge, which under the statute will be 1% in FY 2013, rising to 2% by FY 2017. The hospital value-based purchasing program is one of multiple reforms designed to dramatically alter how Medicare pays hospitals. Other changes that will increasingly tie payments to how effectively hospitals deliver quality care for patients include incentives for implementing EHRs, and payment adjustments based on hospitals rates of hospital-acquired conditions and rates of readmissions.

It would be a permanent part of the IPPS and would make it possible for all hospitals paid under the IPPS to receive value-based incentive payments, according to CMS, which has been collecting quality and patient experience information from acute care hospitals on a voluntary basis since2004, the initial year of the Hospital Inpatient Quality Reporting (IQR) Program.

“The hospital value-based purchasing program proposal expands upon CMS’ long-standing pay-for-reporting program to reward hospitals not just for reporting data, but for the results of that data,” said Berwick. “Value-based purchasing repositions Medicare from an observer of nationwide hospital quality to a formidable force in shaping quality going forward.”

CMS will accept comments on the hospital value-based purchasing Program proposed rule until March 8, 2011, and will respond to them in a final rule to be issued later this year.

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