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Quality & Governance News

Quality-based payment adjustments pile up for hospitals

By Jennifer Bresnick

- CMS is getting serious about using financial penalties to nudge hospitals towards higher quality of care with a slew of payment adjustments starting to pile up in the next few years.  Hospitals have already been affected by two years of 30-day readmission penalties, which cost providers $227 million in 2013 alone, and they’re starting to feel a real sting from the Hospital Value-Based Purchasing (HVBP) program, which released its 2014 figures last week.  Few hospitals will be spared at least some impact to their Medicare reimbursements as additional initiatives like meaningful use and the Physician Quality Reporting System (PQRS) program add their toll, leaving providers up to 10% lighter when they check their wallets over the next few years.

“Medicare is no longer a program that just pays the bills,” stated Dr. Patrick Conway, CMS Chief Medical Officer and Director of the Centers for Clinical Standards and Quality in a blog post last week announcing the HVBP results for fiscal year 2014. “The Affordable Care Act gave CMS many new tools to convert Medicare from a program that paid for decades on automatic pilot into one that deliberately pays to promote better health. Acute-care hospitals across the country not only are paid more for higher quality care, they also have skin in the game.”

While hospitals have always had to pay careful attention to their finances and utilization of scarce resources, the emphasis on quality-based payments is ushering in a new era of scrutiny, forcing organizations to use increasingly sophisticated data analytics to pinpoint areas of waste and opportunities for improvement.  For 630 hospitals, that attention will leave them with a bonus in 2014 from the HVBP pot of $1.1 billion in pooled reimbursements.  About two-thirds of the high performers from last year have maintained their position in 2014, while three-quarters of low performers are returning to the naughty list.

Conway thinks this is excellent news. “The fact that not every higher performing hospital last year made the grade this year, and not every lower performing hospital last year will see payment decline this year, means that hospitals are adjusting to the new world of value-based payment,” he says.  They will have make that adjustment if they hope to run the gauntlet of quality programs that will all try to swipe a portion of their Medicare reimbursements as we move into the era of accountable care.

About two-thirds of hospitals in nearly every state have already been tagged with an average penalty of .38% of reimbursements for 30-day readmissions, and in October of 2014, they will start facing a $265,000 fine for readmissions for knee and hip replacements, emphysema, and COPD patients.  Hospitals that have not been able to comply with Stage 2 of meaningful use will start writing checks to CMS in 2015, further reducing the amount they can bank for each Medicare patient seen.

“If you look at the cumulative effect of the penalties across all these reporting programs, providers are looking at 10% in penalties over the next few years,” warns Steve Besch, Senior Systems Analyst at Ingenious Med.  “PQRS tops out at 2%, value-based purchasing is 2%, as well.  So it’s 2% here, 1.5% there, and all those add up.  It’s approaching 10% of Medicare revenue in the next few years.  That’s very significant.”

Hospitals that are concerned about the financial impact of this avalanche of potential cuts should look to their collection of clinical and financial data to make the necessary improvements before the worst of the payment adjustments take hold.  “We’ve come a long way,” said former National Coordinator Farzad Mostashari this summer while discussing the shift from fee-for-service to value-based care. “If we continue to work together and apply grit, perseverance, and creativity and to listen to the field and adapt based on data, I think we’re going to be just fine.”



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