Late News: Medicare payments cut for more than 1,400 hospitals under value-based plan

More than 1,400 hospitals will see their Medicare payments docked in 2014 as a result of their performance under the CMS' value-based purchasing program, according to newly released federal data.

Payment adjustments, up or down by as much as 1.25%, are based on hospitals' performance across two dozen measures of clinical processes, patient satisfaction and outcomes, including use of preoperative antibiotics, doctor-patient communication and mortality rates.

Launched in October 2012, the program marked the agency's first large-scale move toward reimbursing hospitals for quality, marking a shift from pay-for-reporting initiatives, such as the Hospital Inpatient Quality Reporting Program.

Of the hospitals included in the program for 2014, 1,231 will see their payments increase, while 1,451 will be paid less.

Some experts argue the program's selection of winners and losers each year could discourage some hospitals that are working hard to improve quality but still ending up in the penalty range. “It's a moving target,” said Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality and Payment Reform.

Also, Miller said, the program still relies too heavily on process-of-care measures rather than measures of actual patient outcomes.

Gallup (N.M.) Indian Medical Center, a 71-bed U.S. Indian Health Service hospital, will receive the largest penalty in the upcoming year, a reduction of 1.14%. The hospital was on the penalty side in 2013 as well, losing 0.4% of its Medicare payments. Arkansas Heart Hospital, a 112-bed specialty hospital in Little Rock, will see its payments jump by 0.88%, the largest payment increase of any participating hospital for 2014.

The program is budget-neutral and is funded through an across-the-board 1.25% cut in hospital's base-operating DRG payments—up from 1% in 2013. That cut is expected to generate more than $900 million, according to federal estimates. The percentage withheld from hospital payments increases incrementally in quarter percentage points over the next two years before topping out at 2% in 2017.

Because of the way the program is structured, roughly half of participating hospitals—just over 1,300—will break even over the course of 2014, meaning their payment change is between plus or minus 0.2%, and they will essentially recoup the initial DRG payment cut, said Dr. Patrick Conway, CMS chief medical officer and director of the Center for Clinical Standards and Quality, in a Nov. 14 blog post.

Of the remaining hospitals, 630 will receive a true bonus above what they paid in, and 778 hospitals, or just over a quarter of participants, will see an overall decrease in their Medicare payments, Conway said.

“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,” Conway added.

Follow Maureen McKinney on Twitter: @MHMMcKinney