January 7, 2011: CMS Releases New Value-Based Purchasing Proposed Rule

The new Value-Based Purchasing (VBP) proposed rule is a step towards CMS no longer paying hospitals for simply reporting quality measures. Hospitals will be paid based upon their performance or improvement of specified quality measures. In a related CMS VBP Fact Sheet, CMS indicates that VBP “is intended to transform Medicare from a passive payer of claims based on volume of care to an active purchaser of care based on the quality of services its beneficiaries receive.” Further, VBP is just one of several reforms changing the way Medicare pays Hospitals. Other reforms tying payment to quality patient care are “incentives for implementing electronic health records, and payment adjustments based on hospitals' rates of hospital-acquired conditions and rates of readmissions.”

Key Points from the Proposed Rule:

Who will be affected? Acute Inpatient Hospitals that are paid under the Medicare Inpatient Prospective Payment System for inpatient services provided to Medicare beneficiaries.

How would incentives be determined? During a base period hospital’s performance or improvement would be evaluated.

When would the Value Based Incentives Begin? Fiscal Year 2013 on October 1, 2012.  

How would Incentives be funded? By law, payments must be funded by a reduction in base operating DRG payments for each discharge by 1% in FY 2013 and increasing to 2% by FY 2017.

Note: The initial proposed measures are a subset of measures already being reported to CMS as part of the Hospital Inpatient Quality Reporting Program (Hospital IQR). Data on these measures can be found on the Hospital Compare website at http://www.hospitalcompare.hhs.gov/.

Proposed Baseline Performance Period for VBP Incentives Determination:

• FY 2013 Incentives: An 8 Months Performance Period from July 1, 2011 through March 31, 2012.
• Future FY Incentives: A full year Performance Period

Proposed Performance Scoring:

• CMS will Score a hospital based on Achievement and Improvement ranges for each measure.
  • Each measure’s score would be based on the higher of the Achievement Score or Improvement Score for that Measure for the Performance Period.
  • Determination of which is higher would be made by comparing a hospital’s score in the Performance Period to scores during a Baseline Performance Period.
• FY 2013: CMS is proposing that each Clinical Process Measure and Patient Experience of Care Measure would be scored.
  • Measures that fall in the Achievement Range would earn 0-10 points based on the Achievement Threshold and a Benchmark.
  • Measures that fall into an Improvement Score would earn 0-9 points based on how much the performance improved from the Baseline Period.
• Total Performance Score (TPS) for each hospital would be determined by combining its scores on all of the measures within each domain, multiplying its performance score on each domain by the proposed weight for the domain, and adding the weighted scores for the domains.
  • Proposed weighting of measures
    • 70% Clinical Process of Care Measures
    • 30% Patient Experience of Care Measures (HCAHPS)

 Proposed Incentive Payments:

• CMS proposed to use a linear exchange function to translate a hospital’s TPS into a VBP Incentive Payment.
  • A hospital would be notified of the estimated amount of incentive payment for FY 2013 through its QualityNet account at a minimum 60 days before October 1, 2012.
  • An exact amount will be provided to hospitals on or about November 1, 2012.

CMS is accepting public comments on this Proposed Rule through March 8, 2011. Comments will be reviewed and responded to in the final Hospital VBP rule to be released later this year.

The Medicare Fact Sheet can be accessed here.
The entire Proposed Rule can be accessed here.