Hospitals question whether latest penalty program will help them improve quality

Thousands of hospitals, large and small, are girding for cuts to their Medicare payments in 2014, as federal pay-for-performance programs aimed at boosting clinical quality, improving patient experience and preventing unnecessary hospital readmissions roll into their second year.

Officials at many hospitals, particularly academic medical centers, say they also fear an additional financial hit that may come next October, when the CMS is scheduled to launch the third and final pay-for-performance program established by the Patient Protection and Affordable Care Act. That initiative, the hospital-acquired condition reduction program, will reduce fiscal 2015 Medicare payments by 1% for hospitals that fall within the worst-performing quartile, based on measures of adverse events that occur during hospital stays, including infections and pressure ulcers.

Together with the CMS' value-based purchasing and readmissions reduction programs, both of which began in fiscal 2013, the three initiatives are part of a sweeping effort to move the agency toward paying for high-value care. While quality experts and hospital leaders laud the goals of the HAC reduction program, they have a lengthy list of concerns, including issues with the measures the CMS chose, the potential for multiple penalties under overlapping programs, and the prospect that teaching hospitals will be disproportionately affected. They question whether the programs will actually help hospitals achieve better quality care, and warn that the combined impact of penalties from three pay-for-performance programs could hurt some hospitals.

On the other hand, some consumer-oriented groups say the HAC program doesn't go far enough and leaves out important quality measures.

One teaching hospital that could be impacted by the HAC program is UCSF Medical Center, a 660-bed hospital in San Francisco. According to CMS data released in August and November, UCSF's 2015 base-operating DRG payments will be docked 0.21% under the agency's value-based purchasing program, and another 0.02% under the federal readmissions reduction program.

Dr. Joshua Adler, UCSF Medical Center's chief medical officer, said the hospital has worked hard to reduce patient harm and curb costs. But he said there was still a good chance that the medical center could fall into the penalty range for the next year's HAC reduction program, too. “We absolutely worry about getting dinged by all three,” Adler said.

When the CMS finalized details of the HAC reduction program in the final inpatient prospective payment system rule released in August, the agency estimated that 48.6% of the nation's teaching hospitals would be penalized for high rates of HACs.

Adler said teaching hospitals are being unfairly affected because they have robust surveillance infrastructure in place and are able to identify more adverse events than other types of hospitals identify. “We're just bigger and we're more historically oriented toward this kind of work,” he said. “We find things that others don't.”

Still, he said federal pay-for-performance initiatives have energized UCSF's quality-improvement program and bolstered efforts to target conditions measured in CMS programs, such as catheter-associated urinary tract infections.

Teaching hospitals may also be at a disadvantage because unlike the value-based purchasing and readmissions programs, which levy a penalty on base DRG payments, the HAC program applies a 1% penalty to total payments. That includes disproportionate-share payments received by hospitals that treat large numbers of poor patients as well as indirect medical education payments, said Mary Wheatley, director of quality and physician payment policies at the Association of American Medical Colleges.

“That's our biggest concern,” she said. “Not only are almost half of teaching hospitals potentially subject to the penalty, they'll also be more affected” than other hospitals.

Urban teaching hospitals are also worried about the impact of $1.1 billion in ACA-related DSH payment cuts not related to performance over the next two years, which will further strain budgets for hospitals that serve lots of uninsured and low-income patients.

The HAC program isn't the only federal quality initiative that could disproportionately affect certain types of hospitals, experts say. In a January study published in the Journal of the American Medical Association, Harvard University researchers Dr. Karen Joynt and Dr. Ashish Jha found that major teaching hospitals and safety net hospitals were more likely to incur penalties under the readmissions reduction program. And in analysis posted on his blog last month, Jha and his colleagues found that public hospitals and safety net hospitals tended to do worse under value-based purchasing.

Although the penalties for each of the three pay-for-performance programs generally are relatively modest, the combination of the three could spell trouble for hospitals with already-thin margins, said Nancy Foster, the American Hospital Association's vice president for quality and patient safety. And those penalties are scheduled to increase. For fiscal 2015, the readmissions penalty jumps to 3% and the maximum penalty under value-based purchasing will be 1.5%.

“There's definitely the potential for a big hit under all three,” Foster said. “Large hospitals with complex patients do seem to be at greater vulnerability because of the way the measures are constructed.”

Under the HAC program, the CMS scores hospitals across two measurement domains. The first domain, weighted at 35%, is a composite measure developed by the Agency for Healthcare Research and Quality. That measure, known as AHRQ PSI-90, comprises eight patient-safety indicators, including hip fracture rate, sepsis rate and accidental puncture.

The second domain, weighted at 65%, is made up of two healthcare-associated infection measures—central line-associated bloodstream infections and catheter-associated urinary tract infections. Data for those measures are drawn from the Centers for Disease Control and Prevention's National Healthcare Safety Network, an online infection surveillance program.

Both measurement domains received a thumbs-up from the Measure Applications Partnership, a group of healthcare experts convened by the National Quality Forum to provide pre-rulemaking guidance to HHS. The MAP reviewed 25 measures for the HAC program and provided its recommendations in guidance released in February.

Foster praised the CDC measures but criticized the AHRQ PSI composite measure for its use of administrative claims data, which she said are not reliable gauges of clinical quality. “The AHRQ PSI-90 has significant issues, but the problem for CMS is that there are very few highly reliable measures of HACs,” she said.

Cindy Barnard, director of quality strategies at Northwestern Memorial Hospital in Chicago, shared Foster's concern about the program's use of claims data. “What does the composite HAC measure tell you?” she asked. “As a health professional, I'd have to say frankly not very much.”

For 2014, 868-bed Northwestern will receive a bonus of 0.1% under value-based purchasing and a 0.38% penalty under the readmissions program. Despite the hospital's quality-improvement efforts, Barnard predicted Northwestern could also be in the penalty range for the HAC program, given teaching hospitals' 1-in-2 odds.

She said she worries about the possibility of “double jeopardy” because of duplicate measures in two programs. Both value-based purchasing and the HAC reduction program, for instance, use rates of central line-associated bloodstream infections and catheter-associated urinary tract infections to calculate performance.

In the final inpatient PPS rule, the CMS acknowledged the potential for adverse events to be counted more than once. But the agency argued that healthcare-associated infections “are topics of critical importance to quality improvement in the inpatient hospital setting,” and therefore said it's “appropriate to provide incentives for hospitals to avoid them under more than one program.”

At the same time, some consumer-oriented groups said the HAC program isn't far-reaching enough. The Leapfrog Group, an employer-backed quality-improvement organization, lamented that the CMS did not include many of the conditions in the HAC reduction program that are currently in the federal HAC nonpayment program.

That policy, instituted by the Deficit Reduction Act and launched in 2008, forbids hospitals for receiving additional payment for various safety-related conditions—including poor glycemic control and objects left inside patients after surgery—provided they were not present on admission.

Data on eight of those HACs are posted on the CMS Hospital Compare website and were refreshed regularly until 2012. In September, however, the CMS began posting updated HAC performance data only as a spreadsheet contained in its data file, with hospitals identified by provider ID number rather than by name.

That change did not sit well with groups like Leapfrog. “Now there's a gap in the information that is publicly reported,” said Missy Danforth, Leapfrog's senior director of hospital ratings. “It's a step backward. Consumers are losing measures that are important to them.”

Hospital officials say there's no way to predict whether they'll get dinged under the HAC reduction program because a quarter of hospitals will fall in the penalty range no matter what.

“We might look really good on our dry run and in our own internal analysis, but depending on how other hospitals do we could end up penalized,” Barnard said. “The simple fact that 1 out of every 2 teaching hospitals will be penalized raises questions about whether this program is measuring clinical phenomenon in a way that will really improve quality.”

Follow Maureen McKinney on Twitter: @MHMMcKinney