CMS names hospital winners, losers in quality incentive program

Ideas written into law in 2010 to push hospitals toward better and safer care are now a pervasive part of doing business with Medicare.

Next year, for the first time, the CMS will impose a 1% penalty on hospitals that fall within the worst-performing quartile on measures of bad things that happen to patients during their stays, such as pressure ulcers, pulmonary embolisms and infections.

Last week, the agency identified 724 hospitals that will get hit with the first round of penalties imposed under the Hospital-Acquired Condition Reduction Program. They include institutions such as Northwestern Memorial Hospital in Chicago and the Cleveland Clinic. The CMS estimated that overall Medicare payments would drop by roughly $330 million in 2015 due to the HAC program.

It's part of the healthcare reform law's wide-ranging effort, along with the readmissions reduction and value-based purchasing programs, to make Medicare payments reflect the quality of care delivered. In fiscal 2015 the programs together put 5.5% of inpatient Medicare payments at risk.

“There's a tendency to think it's a bonus here or penalty there, but these are pretty significant when you add them all together,” said Eric Fontana, practice manager for research and insights at the Advisory Board Co.

The CMS also just posted the third iteration of data for Medicare's value-based purchasing program.

In the latest round, the number of hospitals getting a bonus exceeds the number being penalized by about 340, a reversal from last year. Still, more than 1,300 are in negative territory.

The HAC program has drawn sharp criticism from hospitals and some experts who warned that it would disproportionately affect hospitals that serve poorer and sicker patient populations. Those concerns were borne out by the data the CMS posted last week.

A chief complaint is that many of the measures rely on claims data that isn't consistent or reliable. Another is that the measures aren't appropriately adjusted to reflect the severity of patients' conditions or socio-economic factors.

Hospitals are scored across two measurement domains. The first, weighted at 35%, is a composite patient-safety measure developed by the Agency for Healthcare Research and Quality that includes indicators such as postoperative hip fracture rate. The second domain, weighted at 65%, consists of two hospital-acquired infection measures drawn from data reported to the Centers for Disease Control and Prevention's online infection reporting system.

About 140 hospitals narrowly dodged getting hit with the HAC penalty in 2015. The law calls for a 1% cut to be applied to the hospitals scoring in the lowest quartile. The CMS apparently gave hospitals just over the threshold this year a pass because applying the cut to all of them would have moved too many into the penalty box, according to the Advisory Board's analysis of the data.

The release of the HAC data comes weeks after HHS announced an “unprecedented decline” in avoidable hospital harm from 2010 to 2013, which officials said prevented an estimated 50,000 deaths and saved nearly $12 billion. HHS attributed much of that progress to its own quality-improvement initiatives, including the $1 billion Partnership for Patients.

In the value-based purchasing program, about 70 hospitals improved their payment adjustment by a full percentage point compared with last year's results. Only a few swung a percentage point or more in the other direction.

The Advisory Board's Fontana observed that many of the hospitals getting penalties are big ones. Because the program is revenue-neutral, those penalties are generating bonuses for a larger number of smaller hospitals.

The program is funded by a $1.4 billion pool generated by an across-the-board reduction in base operating DRG payments. For 2015, that cut rose to 1.5% from 1.25% in 2014. It will grow incrementally annually until reaching 2% in 2017. The adjustments are based on hospitals' performance across 26 measures of efficiency, clinical processes, patient satisfaction and outcomes.

The fiscal 2017 program will add two safety measures to the value-based purchasing program—for hospital-acquired MRSA and Clostridium difficile infections—and one new clinical process measure for early elective deliveries. Six measures will be removed because they've been identified as “topped out.”

“Some measures are getting to the point where we've achieved such high levels that there's very little room for additional improvement,” said Nancy Foster, the American Hospital Association's vice president for quality and patient safety policy.

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