A draft bill issued last week to establish a value-based purchasing program is an early sign that Congress may be serious about healthcare reform under a new administration, yet the rewards and penalties system of this proposal may have unintended financial consequences for hospitals, some in the industry believe.
The value-based purchasing proposal to date is perhaps the most concrete reform effort that has emerged from the Senate Finance Committee since its chairman, Sen. Max Baucus (D-Mont.), pledged to work in a bipartisan manner on comprehensive healthcare reform with Sen. Chuck Grassley (R-Iowa), the committees ranking member, and the ailing Sen. Edward Kennedy
(D-Mass.), chairman of the Senate Health, Education, Labor & Pensions Committee. Its release last week topped off a flurry of events to move the healthcare reform train along, with Kennedy appointing several working groups on healthcare and the 28-member National Priorities Partnership releasing its own objectives to cut waste in the system.
Value-based purchasing, previously known as pay-for-performance, seeks to improve patient outcomes by providing incentives for providers to deliver high-quality care, and was one of the elements of a comprehensive white paper Baucus released several weeks ago that offers several paths to universal healthcare coverage, including the creation of an insurance exchange and expanding existing federal programs such as Medicare and Medicaid.
Getting paid for quality will eventually become a reality for hospitals, said Chip Kahn, president of the Federation of American Hospitals. The key is whether its done in a fair way that results in further improvement, he said. But the way the Baucus-Grassley proposal is drafted leaves too much for HHS to interpret. It needs to be more specific about how hospitals would be reimbursed under these quality measures, he said.
Keith Kasper, chief financial officer of the University of Pennsylvania Health System, Philadelphia, said he is supportive of the senators efforts and looked forward to seeing the program develop. Yet, he acknowledged that hospitals need to understand the financial impact of such mandates when further reductions in reimbursement are also being considered.
Hospitals currently have to report on more than 40 quality measures on their claims for Medicare inpatient services to get a 2% increase they would otherwise not receive to their payment rates. The proposal from Baucus and Grassley would take pay-for-reporting one step further by linking Medicare payments not only to reporting and tracking quality activities, but also to how well the hospitals actually perform on these quality measures.
Providers would be either rewarded or penalized financially depending on how they measure against a host of standard quality measures. The program would be phased in over the course of five years, starting in fiscal 2012, with payment levels gradually increasing from 1% to 2%.
The program aims to be budget neutral. According to a summary of the proposals, any savings from reduced payments to certain hospitals would be kept in the hospital payment system in the form of increased payments to other hospitals. Paul Weygandt, vice president for physician services at J. A. Thomas & Associates, a healthcare compliance consultancy, said he understood the concept to pay good performers more and poor performers less based on the quality they provide. Nevertheless, Weygandt said some hospitals may be forced to divert staff from clinical roles to roles that assure optimum compliance of these core measures.
If value-based purchasing is included in legislation, its likely to be part of a larger healthcare bill, Kahn said. The question is what bill will that be, whether its legislation on Medicares doctor payment fix or part of budget reconciliation or a larger health reform bill, he said.