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Data Released on Medicare Bonuses

November 9, 2016


WikiLeaks: The Hacker’s Hacker


According to federal data released November 1, more than 1,600 hospitals will see bonuses from Medicare in 2017 under the Hospital Value-Based Purchasing (VBP) Program; about 200 fewer than last year.


Program Background


The Hospital VBP Program was established under the Affordable Care Act in 2012 as one of many initiatives to pay for healthcare on the basis of quality, not quantity.  This is the fifth year of the Program, affecting payment for inpatient stays in approximately 3,000 hospitals across the country.  Hospitals’ payments depend on how well they performed compared to their peers on important healthcare quality and resource use measures within four domains during a performance period, and how much they have improved the quality of care provided to patients over time.


The domains for the FY 2017 Hospital VBP Program and the weighting for these domains were:

  • Clinical Care
    • Outcomes (25 percent)
    • Process (5 percent)
  • Patient and Caregiver Centered Experience/Care Coordination (25 percent)
  • Safety (20 percent)
  • Efficiency and Cost Reduction (25 percent)


The Hospital VBP Program is budget-neutral, funded each year through a reduction of participating hospitals’ base operating Medicare Severity Diagnosis-Related Group (MS-DRG) payments for the applicable fiscal year.  These payment reductions are redistributed to hospitals as incentive payments based on their Total Performance Score (TPS), as required by law.  The actual amount earned by each hospital will depend on its TPS, value-based incentive payment percentage (see Hospital VBP incentive payment adjustment factors for FY 2017) and the total amount available for value-based incentive payments.


Hospital TPSs were subject to minimum case and measure requirements.  Also, hospitals must have a domain score for at least three of the four domains in order to have a TPS calculated.  Hospitals that do not meet the minimum domain requirements do not have their payments adjusted in the corresponding fiscal year.  For every measure, each of the hospitals participating in the Hospital VBP Program receives an improvement score and an achievement score; the higher of the two scores is awarded as the measure score.


Current Year Results


The number of hospitals whose payments were reduced grew from 1,236 in 2016 to 1,343 in 2017, but the changes to base DRG payments will be minimal, in the range of 0.5 to -0.5 percent, for about half of the hospitals in the Program.


Program Changes in Fiscal 2018


The Centers for Medicare & Medicaid Services (CMS) also announced several changes to the Program for fiscal 2018:

  • Two measures have been removed from the Clinical Care: Process subdomain (the AMI-7a and IMM-2 measures) and the remaining measure (PC-01) has been moved to the Safety domain.
  • A three-item Care Transition dimension, which is part of the Hospital Consumer Assessment of Hospital Providers and Systems (HCAHPS) survey, has been added to the Patient and Caregiver Centered Experience/Care Coordination domain.


In addition, the FY 2018 Hospital VBP Program will include four equally-weighted domains:

  • Clinical Care (25 percent)
  • Patient and Caregiver Centered Experience/Care Coordination (25 percent)
  • Safety (25 percent)
  • Efficiency and Cost Reduction (25 percent)


Industry Reaction and Comment


While the Program attempts to use financial sticks and carrots to motivate 3,000 U.S. hospitals to provide better care, some policy experts believe that its effectiveness is diminished by a variety of factors, including limited financial consequences, and are beginning to question the value of the Program.


“We actually have a good amount of evidence on this. We know that the value-based purchasing program has had very little, if any, effect,” said Ashish Jha, MD, a professor of health policy at Harvard School of Public Health.


Weigh all the evidence on the Hospital VBP Program, and “you almost wonder, is it time to retire it?” said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute.  It's not clear, de Brantes said, that it's improving quality.


The financial swing “isn't that material,” said William Conway, MD, executive vice president of Henry Ford Health System in Detroit.  Rather, the five-hospital system pays attention to the components of the Program “because in aggregate they represent good care.”


Nancy Foster, the American Hospital Association's vice president of quality and patient safety policy, stated:  "CMS must continue to refine the Program to ensure that it effectively drives quality forward for hospitals and the patients they serve, including ensuring its measures prioritize areas with the greatest impact on patient care.”


In a press release dated November 1, CMS describes the ultimate goals of the Hospital VBP Program as follows:

As we more closely link patient outcomes and treatment costs to value-based hospital payment, the Hospital VBP Program not only aims for quality gains on paper, it also aims to promote a culture focused on the needs of patients. Value-based purchasing in Medicare continues to move ahead, improving healthcare for people with Medicare now and creating a healthcare system that will ensure better care, smarter spending, and healthier people for generations to come.


While there may be differing opinions concerning the effectiveness of the current program, it is clear that all are in agreement regarding the ultimate goal and that the move towards value-based payments will continue to gain momentum.

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