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Among the many reforms mandated by the Affordable Care Act (ACA), hospitals will be subject to a Hospital Value-Based Purchasing Program (Hospital VBP Program) applicable to Medicare payments for inpatient stays under the Inpatient Prospective Payment System (IPPS). To that end, the Centers for Medicare & Medicaid Services (CMS) has recently issued a proposed rule implementing this program. 76 Fed. Reg. 2454 (January 13, 2011). This rule represents a natural continuum in the line of quality-based health care initiatives from CMS, including the quality reporting programs for hospital inpatient services, hospital outpatient services, physicians and other related health care professionals, home health agencies, and skilled nursing facilities.

To evaluate a hospital’s quality of care under the Hospital VBP Program, the ACA requires CMS to use measures from the Hospital Inpatient Quality Reporting Program (Hospital IQR Program). The Hospital IQR Program, a voluntary system through which hospitals report data related to certain quality measures which is in turn reflected on the Hospital Compare website, presently includes 27 process-of-care measures. Among these are acute myocardial infarction, heart failure, pneumonia, and surgical care; 15 claims-based measures related to mortality and readmission rates; three structural measures regarding cardiac surgery, stroke care, and nursing care; and the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey. CMS proposes to use measures identified by the Secretary of the Department of Health and Human Services, initially touching on the following conditions/topics:

Based on the above conditions/topics, CMS proposes 17 process-of-care measures and eight survey measures as the initial set of measures against which to evaluate hospitals. Initial clinical process-of-care measures include AMI-related measures such as fibrinolytic therapy received within 30 minutes of hospital arrival, HF-related measures such as evaluation of left ventricular systolic function, and HCA-related measures such as receipt of a prophylactic antibiotic within one hour of surgical incision. The initially selected HCAHPS survey measures include:

A detailed list of these measures can be found at 76 Fed. Reg. 2462, Table 2. Note that a selected measure will not apply to a hospital that does not provide services “appropriate to” the selected measure. CMS intends to add new measures to the program after such measures have been included in the Hospital IQR Program and have been listed on Hospital Compare for one year. While CMS’s initial focus will be process of care, CMS intends to expand its quality analysis to include outcome measures, efficiency measures, and patients’ experience of care measures.

Effective July 1, 2011, CMS proposes to begin evaluating hospitals through these initial measures. As a result of CMS’s review of these measures, beginning in fiscal year 2013, hospitals will receive incentive payments for CMS identified quality care for discharges occurring on or after October 1, 2012 and/or for improvements in quality performance over a previous period (to be determined by CMS). The incentive payments will be funded by a 1% reduction to base operating diagnosis-related group (DRG) payments for each discharge in fiscal year 2013, and up to a 2% reduction by fiscal year 2017. Conversely, hospitals that fail to meet CMS-proposed quality measures or to improve performance will be penalized by receiving a reduction in DRG payments of up to 1%. CMS estimates that no hospital will receive more than a net 1% increase or decrease in payments.

The monetary incentives and penalties associated with quality of care continue to rise for hospitals with the proposed adoption of this rule implementing the Hospital VBP Program. Hospitals face scrutiny under the existing audit landscape from entities such as the recovery audit contractors (RACs), who are incentivized to find quality issues and whose focus, to date, has primarily been on hospitals. The quality measures recently proposed by CMS in the Hospital VBP Program rule focus on many of the same conditions/issues identified under the RAC Program as allegedly preventable – or at least mitigable – culprits in rising health care costs. This proposed rule underscores the need for hospitals to focus on the measurable aspects of delivery of quality care by implementing internal auditing procedures that are thorough, timely, properly focused, and responsive so as to ensure that the most accurate and complete data exist, are properly maintained, and are made available to the appropriate entities in a timely manner.

CMS is accepting comments on the proposed rule through March 11, 2011.

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