By Dr. Patrick Conway, CMS Chief Medical Officer and Director of the Centers for Clinical Standards and Quality
On November 14, for the second year in a row, the Centers for Medicare & Medicaid Services (CMS) posted Hospital Value-Based Purchasing payment incentive adjustment factors for fiscal year 2014. We think this second anniversary deserves recognition—it’s a sign that value-based purchasing in Medicare is becoming routine.
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. Now, thanks to one of these tools, the Hospital Value-Based Purchasing program, Medicare is no longer a program that just pays the bills. Acute-care hospitals across the country not only are paid more for higher quality care, they also have skin in the game.
In FY 2014, 1.25 percent of a hospital’s Medicare base-operating DRG payments go into a value-based purchasing pool. Depending on how well hospitals measured up to their peers on important health-care quality indicators during a prior performance period, they will either break even, get a bonus, or—if their performance is lower than average—get back less than what they contributed to the FY 2014 pool.
FY 2014 payments began October 1. About half of the hospitals participating in the program —over 1300 hospitals—will essentially break even over the course of the year, that is, their payment change is between -0.2 percent and +0.2 percent. Across the country, 630 hospitals—just under a quarter—will receive a bonus, that is, an increase in Medicare payment above +0.2 percent. Just over a quarter of hospitals (778) will receive an overall decrease in Medicare payment, which means that it is less than -0.2 percent.
But even though we’d like to see every hospital across the country offer the highest quality care possible, we’re pleased with this round of results. Hospital Value-Based Purchasing provides a useful snapshot of how hospitals are performing on important indicators for patient safety, care, quality, and well-being. The Hospital Value-Based Purchasing program refines the measures it uses to evaluate performance annually.
In FY 2014, there were fewer higher performers—that is, their incentive payment is greater than the amount they contributed—than lower performers—their incentive payment is lower than the amount they contributed, that higher performers’ bonuses on average will be larger than the lower performers’ losses over the course of the year.
Finally, a little over two-thirds of the higher performers were higher performers last year, and about three-quarters of the lower performers also had an incentive adjustment factor of less than one in FY 2013. That’s good news too. 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. It also may mean that the important addition of 30-day mortality measures for heart attack, heart failure and pneumonia had an impact on hospitals’ scores.
As the Hospital Value-Based Purchasing program continues to evolve with a richer set of measures including an efficiency measure in FY 2015, we may see the mix of value-based payment adjustment factors change again. Meanwhile, value-based purchasing in Medicare continues to move ahead, improving the way that health care is delivered to people with Medicare now and helping create a health care system that will ensure quality care for generations to come.
To see the November 14, 2013 value-based incentive payment adjustment factors, please go to: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/