CMS proposal to reward hospitals for providing high-quality care

Value-based purchasing starts with discharges in fiscal year 2013

Beginning with discharges on Oct. 1, 2012, your hospital's reimbursement could be affected by its performance on quality measures as the Centers for Medicare & Medicaid Services (CMS) implements the value-based purchasing program mandated by the Patient Protection and Affordable Care Act.

According to the proposed rule, issued by CMS Jan. 7, 2011, reimbursement in fiscal year 2013 will be based on hospitals' scores on 17 clinical processes of care measures and eight dimensions of the patient care experience. (For a list of the measures that are proposed as part of the first year of the value-based purchasing program, see the chart , below.)

CMS has proposed a performance period from July 1, 2011, through March 31, 2012, for the fiscal year 2013 hospital value-based purchasing payment determination.

Value-based purchasing make it more important than ever before for documentation in the patient record to be complete and accurate, says Deborah Hale, CCS, president of Administrative Consultant Services LLC, a health care consulting firm based in Shawnee, OK.

"This rule clearly moves us away from pay for reporting quality data to pay for performance. The hospital's attention to performance improvement with accuracy and timeliness of quality data submitted to CMS is essential to the hospital's success in the future," she adds.

Under the proposed rule, hospitals that perform well on quality measures or improve their performance on the measures would receive value-based incentive payments.

"Value-based purchasing repositions Medicare from being an observer of nationwide hospital quality to a formidable force in shaping quality going forward," according to a statement by CMS Administrator Donald Berwick, MD.

To fund the value-based payments, CMS proposes to reduce base operating DRG payments by 1% for each discharge in fiscal year 2013. The percentage would rise to 2% by fiscal year 2017.

For fiscal year 2013, CMS proposes to use 17 clinical processes of care measures and eight dimensions from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS). The agency proposes to add three mortality outcomes measures, eight hospital-acquired conditions, and nine Agency for Healthcare Research and Quality (AHRQ) measures for the fiscal year 2014 program.

CMS will accept comments on the proposed rule until March 8 and will release the final rule later this year.

Many of the details in value-based purchasing are specified in the Patient Protection Affordable Care Act and are not likely to change in the final rule, says Beth Feldpush, DrPH, senior associate director of policy for the American Hospital Association (AHA).

"We share the concerns of hospital representatives about some of the issues in the proposed rule. CMS is going to get a lot of comments on these issues, but we do not know if they will make changes in the final rule," she says.

The AHA is concerned that hospitals may face double or triple reimbursement cuts for the same issues if CMS adds hospital-acquired conditions to value-based purchasing quality measures, as it proposes doing in fiscal year 2014, Feldpush says.

"Current policy specifies that if a patient experiences certain hospital-acquired conditions, the hospital won't get a higher payment for the complication. An explicit provision in the Accountable Care Act mandates that in 2015, hospitals in the highest quartile for hospital-acquired conditions receive a 1% reduction in total Medicare reimbursement. We are opposed to CMS using the same measures multiple times to penalize hospitals," she says.

The organization's other big concern is the proposal to base 30% of the hospital's score on HCAHPS measures.

"Hospital representatives have made it clear that they think that HCAHPS measures should be given less weight," she says.

"The 'cuts' can be rewards if hospitals and their staff, including case managers, focus on providing evidence-based care every time for every patient. In particular, coordination between hospitals, physicians, nurses, case managers, and others is the key to ensuring that the right care is provided to each and every patient and that patients are highly satisfied with their care," says Danielle Lloyd, MPH, senior director, reimbursement policy for the Premier health care alliance.

By starting now, and benchmarking against peers to gauge areas of opportunity, hospitals can avoid a negative impact while, at the same time, improving the care they provide to patients, she says.

The value-based purchasing program was developed with the intention of motivating all hospitals to provide the quality of care they provide and was structured in a way that makes it possible for all hospitals paid under the Inpatient Prospective Payment System to receive the value-based incentive payments, CMS wrote in the proposed rule.

"Today's proposal is 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," Berwick said.

The value-based purchasing program expands CMS' long-standing program that rewards hospitals for reporting quality data.

Hospitals have been required to report on the measures for several years in order to receive the full market basket update in reimbursement.

The initial measures that CMS will use to determine the incentive payments already are part of the Medicare Hospital Inpatient Quality Reporting Program and are being reported on CMS' Hospital Compare website.

Under the proposed rule, a hospital would receive value-based incentive payments based on either how well the hospital performs on selected quality measures or how much the hospital's performance improves from its performance during a baseline period, which began July 1, 2009, and ended March 10, 2010.

CMS says it will announce the performance targets determined by the baseline period 60 days before the performance period starts.

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 would be for that fiscal year.

"It is imperative that hospitals are tracking their progress, not only against the targets CMS will announce, but also their performance relative to other hospitals, as those targets will move as the field's performance improves over time," Lloyd says.

The proposed rule includes proposed measures and performance methodology as well as a proposal for scoring the performance and details on how the scores translate into value-based incentives.

The new program will be a fluid one, subject to change as knowledge, measures, and tools evolve, CMS says.

Under the proposed rule, hospitals would earn 0 to 10 points for performance on each measure depending on where their performance falls within an achievement range. They would earn 0 to 9 points based on how much their performance on each measure during the performance period improved from performance on the measure during the baseline period. CMS would calculate a total performance score for each hospital by taking the higher of the performance or improvement scores and combining them across all of the measures, Lloyd says.

For the HCAHPS measures, there is a second step to the calculation, Lloyd says. CMS has proposed a consistency score intended to encourage hospitals to improve their performance across the dimensions rather than on the individual dimension. Consistency is worth 20 of the total 100 points available for patient experience and is added to the achievement or improvement scores.

According to the proposal, 70% of the score would be based on clinical processes of care, with the remaining 30% based on patient experience data.

CMS adds that in future fiscal years, it may base payments on a full year of performance on the quality measures. CMS proposes to use an 18-month performance period for the three mortality measures that will be used to determine payments in 2014 and will propose a performance period for the eight hospital-acquired conditions, and nine AHRQ measures in the future.

The value-based purchasing program is one of multiple programs that change how Medicare pays hospitals, CMS said in a prepared statement. Others that tie payments to how effectively hospitals deliver quality care include incentives for implementing electronic health records and payment adjustment based on hospital rates of hospital-acquired conditions and rates of readmission, the agency said.

CMS proposes to notify each hospital of the estimated amount of its value-based incentive payment for fiscal year 2013 through its Quality Net account at least 60 days prior to Oct. 1, 2012. Under the proposal, each hospital would be notified of the exact amount of its incentive payment on or about Nov. 1, 2012.

"We view as urgent the necessity to improve the quality of care furnished by these hospitals and we believe hospitalized patients in the United States currently face patient safety risks on a daily basis," CMS wrote in the proposed rule.

Conditions chosen are those with the highest mortality, conditions that are high volume and high cost, and conditions for which wide treatment variations have been reported despite established clinical guidelines. The measures address the six quality aims of effective, safe, timely, efficient, patient-centered, and equitable health care, CMS says.

CMS excluded the measures on which the vast majority of hospitals have achieved high performance. It listed seven measures as "topped out": for AMI patients, aspirin at arrival, beta-blocker at discharge and ACE inhibitor at discharge; smoking cessation counseling for patients with AMI, heart failure, and pneumonia; and surgery patients with appropriate hair removal.

"Our priorities are to transform how Medicare pays for care and to encourage hospitals to continually improve the quality of care they furnish. Our analysis of the impact of adding these topped-out measures would mask true performance differences among hospitals and, as a result, would fail to advance these priorities," CMS says.

[For more information, contact Deborah Hale, president of Administrative Consultant Services LLC, e-mail:; Danielle Lloyd, senior director, reimbursement policy for Premier health care alliance, e-mail:]

Proposed Quality Measures Hospital Value-Based Purchasing Program Fiscal Year 2013

Acute Myocardial Infarction

  • Aspirin prescribed at discharge
  • Fibrinolytic therapy received within 30 minutes of hospital arrival
  • Primary percutaneous coronary intervention within 90 minutes of hospital arrival

Heart Failure

  • Discharge instructions
  • Evaluation of left ventrical systolic function
  • ACE inhibitor or angiotensen receptor blocker for left ventrical systolic dysfunction


  • Pneumoccal vaccination
  • Blood cultures performed in ED prior to initial antibiotic received in hospital
  • Initial antibiotic selection for community-acquired pneumonia in immunocompetent patient
  • Influenza vaccine

Healthcare Associated Infections

  • Prophylactic antibiotic received within one hour prior to surgical incision
  • Prophylactic antibiotic selection for surgical patients
  • Prophylactic antibiotics discontinued within 24 hours after surgery end time
  • Cardiac surgery patients with controlled 6 a.m. postoperative serum glucose

Surgical Care Improvement

  • Surgery patients on a beta-blocker prior to arrival that received a beta-blocker during the perioperative period
  • Surgery patients with recommended venous thromboembolism prophylaxis ordered
  • Surgery patients who received appropriate venous thromboembolism prophylaxis within 24 hours prior to surgery to 24 hours after surgery.

Patient Experience of Care Measures

  • Communication with nurses
  • Communication with doctors
  • Responsiveness of hospital staff
  • Pain management
  • Communication about medicines
  • Cleanliness and quietness of hospital environment
  • Discharge information
  • Overall rating of hospital