The Centers for Medicare & Medicaid Services (CMS) issued a report to Congress on November 21 which provides a framework for how Medicare hospital payments can be linked to performance measures.
The plan set forth in the report entitled "Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing Program," would "make a portion of hospital payment contingent on actual performance on specified measures, rather than simply on a hospital’s reporting data for these measures." Under one model, payments to hospitals for each diagnosis related group (DRG) would be reduced by 2 to 5 percent. Hospitals could earn those funds back through incentive payments received for performing well on a specific set of quality measures.
A hospital would be evaluated on each performance measure based on "attainment" by being compared with national thresholds and benchmarks or "improvement" by comparing the hospital’s current performance to its performance in the previous 12 months. A hospital’s total score would determine its percentage of incentive payments.
CMS’ report proposes that the value-based purchasing program be phased in over three years, ultimately replacing Medicare’s Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) Program. The RHQDAPU Program currently requires hospitals to meet certain standards, including reporting on inpatient quality measures, to obtain their full IPPS annual payment update. The report indicated that the value-based purchasing program would be implemented in a budget-neutral manner.
According to BNA’s Health Care Daily, CMS’ report is substantively similar to an Options Paper released by the agency in March. The American Hospital Association (AHA) and the Federation of American Hospitals (FAH) had mixed reviews of the Options Paper, expressing concern about the budget-neutral funding of the program, but supporting incentive payments to hospitals to encourage improved performance.
CMS issued the report in response to a provision in the Deficit Reduction Act of 2005, which authorized the Secretary of the Department of Health and Human Services to develop a plan to implement a value-based purchasing program that would commence in fiscal year 2009. Congressional action is required for the valuebased purchasing program to be enacted.
CMS’ report can be accessed at http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/ HospitalVBPPlanRTCFINALSUBMITTED2007.pdf.
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