Quality and Money

April 10, 2013
On April 18, the federal Centers for Medicare & Medicaid Services (CMS) created a proposed rule for the Medicare Hospital Inpatient Prospective Payment System (IPPS) that encompasses a number of important changes.

On April 18, the federal Centers for Medicare & Medicaid Services (CMS) created a proposed rule for the Medicare Hospital Inpatient Prospective Payment System (IPPS) that encompasses a number of important changes.

Among other elements, the proposed rule will require, beginning in fiscal year 2014, that hospitals report performance data in order to avoid losing 2 percent of their annual market basket adjustment to Medicare IPPS rates. Meanwhile, the final rule for the value-based purchasing (VBP) program which will affect reimbursement for hospital discharges beginning in FY 2013, came out earlier this year. For the second program year (FY2014), a new domain for performance measurement is proposed to be added, around efficiency. In addition, the proposed IPPS rule lays out many basic aspects of the Hospital Readmissions Reduction Program, specifying what constitutes a readmission, and helping hospitals to begin calculating excess readmissions. The new proposed rule also provide further details for the Hospital Acquired Condition (HAC) program, effectively expanding that program’s scope, and potentially introducing financial penalties for hospital-acquired conditions, beginning in October 2014.

There are numerous levels of details involved in all these changes and potential changes, but the bottom line is clear: hospital reimbursement under Medicare (and, inevitably, under private health insurers as well, as they eventually copy some of Medicare’s payment innovations) will increasingly be tied to performance, on numerous levels and in numerous areas.

Given all the actual and anticipated changes involved, researchers at the Waltham, Mass.-based Global Institute for Emerging Healthcare Practices, a division of the Falls Church, Va.-based CSC, have been producing a series of white papers and reports assessing the implications of all these changes for providers. Most recently, Caitlin Lorincz, research analyst, and Jane Metzger, principal researcher, at the Global Institute, produced a report, “Update on Performance-Based Reimbursement: The CMS-Proposed Rule for the Medicare Hospital Inpatient Prospective Payment System for Acute-Care Hospitals,” which analyzes how the proposed changes will affect hospital leaders.

Metzger and Lorincz spoke recently with HCI Editor-in-Chief Mark Hagland regarding their report and its implications for healthcare and healthcare IT leaders (the quotes below are from Jane Metzger). Below are excerpts from that interview.

What would your “elevator speech” be around the research you provided in your most recent report, in this area?
The first point is that this really isn’t a surprise, but that our understanding [of the issues involved] is getting clearer. And part of what isn’t a surprise is that this series of programs puts more and more of the revenues that hospitals receive from Medicare at financial risk. And there are clearly going to be some losers, because every time they talk about how performance gets translated into money, there will be a high percentage of hospitals that will lose money. And in fact, we kind of knew this was coming, because it had to be revenue-neutral.

The second point is that it’s not really just a Medicare program. First of all, in terms of the measures, there are some claims-based measures that Medicare puts together; however, the bulk of the measures are what they call chart-abstracted, which means that the hospital has to do it—and in their sampling methodology, they want the sampling to be of all patients. So even Medicare is now looking at all patients. And the private payers are already moving forward; I was looking at a program in Minnesota the other day that looks an awful lot like value-based purchasing.

So regardless of what happens with the shared-savings program for accountable care organizations, this train is out of the station, and though I don’t like the term paradigm shift, this surely is one. And in our next white paper, we’ve built a little chart that looks at value-based purchasing as 1 percent of payment, and this other thing is 1 percent—but remember, a lot of hospitals in the U.S. are already operating in the red.

And even in the so-called good old days, they never had much of a margin. So even though the percentages look low, this is a big deal. And some hospitals have huge Medicare volumes, and that’s been a big part of their business. So this is way beyond experimentation; and it’s rolling out. And we’ve been expecting it. And what these white papers talk about is, each time they issue a proposed or final rule, you learn more.

Part of what makes these rules and proposed rules complicated is that CMS sort of lays out their thoughts over three years. And that’s kind of significant, because it gives you some advance warning of the measures that are coming. And they’ve adopted that practice for value-based purchasing, and for the readmissions reduction program, and for the hospital-acquired conditions program. So this really is determining the externally mandated quality improvement agenda for hospitals.

Let’s talk about readmissions.
Yes, you know they used to call them peer review organizations, and now they’re quality improvement organizations (QIOs); and there has already been in place a program to look at cases that CMS has flagged for potential non-payment. And the measures have been in IQR [the Medicare Inpatient Quality Reporting program] for years. But the QIOs were given some extra responsibility for looking at Medicare patient readmissions, up to and including the ability to recommend non-payment. Well, what the readmission reduction program does is, it says, well, if you’re a bad performer on readmissions, we’re also going to hit your DRG payments with a penalty; so it’s like a pile-on, on readmissions.

So this new proposed rule just reinforces and intensifies the focus on readmissions?
Yes. And basically what they’re going to do is to calculate a readmissions performance ratio relative to other hospitals to see where you sit, and they said that the people who have an excess level compared to all hospitals will lose up to 1 percent of their base payments. Now, they did talk about how they’re going to calculate the readmissions ratio, but they haven’t explained exactly how that gets translated into the payment reduction. But at least we now know what the measures are.

And the areas they’re looking at—heart failure and pneumonia—are the most obvious ones, right?
Well, they’re the areas with the highest rates of readmissions. They’ve said, however, that they’ll be expanding the list; they’re always expanding things in some direction. Now, one of the things that’s most challenging for hospitals is that this covers readmission for any condition, and it can be for readmission to any hospital. And I think the rationale is that if you had a significant enough condition the first time around, it should have been addressed. So it makes it hard for hospitals in that a patient could go across town, right?

However, this whole area around working harder on discharge planning and discharge instructions, and connecting a patient to a PCP [primary care physician] so they will get follow-up care, there’s even a lot in the literature around this. But with all this pressure coming from the aging of the population and the increasing burden of chronic illness, and of course you see all that in Medicare—this becomes very significant.

What do you see as the biggest implications of all this on the healthcare IT front?
There’s a whole range of things you can do to work on readmissions in particular, to begin with. You can know what the risk factors are, a major one being previous readmissions. And once you have the data electronically, you can certainly flag patients that you know you’ll need to pay special attention to. And you can use order sets, documentation templates, and patient tracking protocols, so that you’re looking at those patients—and you can make sure the patient has a follow-up appointment, and you can make sure the patient and family know about it.

And the case manager can have a call list. And all of these care interventions to reduce the risk of admission, work amazingly better when supported by information technology gathering the data you need, and making it available to the folks on the front lines.

And you need really good data warehouses and report-writing capabilities, right?
This is a really good example where, let’s say there’s a health system with multiple hospitals—it would be really advantageous to know, across hospitals, admission history and other medical record information about patients—when they present for care, and so on. What’s harder is when they present outside your corporate boundaries. But you need to capture the data, and you need really good analytic skills. And you know, it’s not that long ago in hospitals that, once the coding had been done on a discharge, the information about the stay would be archived. That’s not terribly ancient history.

At a minimum, you need to know, for the patients who have been seen in this particular hospital, what their admissions history has been. But that’s just the tip of the iceberg of what you’d really want to know about the patient to resolve issues, understand them all, and send the patient home well-equipped in terms of follow-up appointments, support, and information, to minimize readmission.

Now, that’s just one of these programs. But the same is true for value-based purchasing: you’ve got these measures, you’ve got patient conditions that are targeted, and there are going to be more. By the way, these are all familiar measures. However, patient experience is in value-based purchasing. And probably one of the most difficult areas for hospitals is that patient experience measures are part of both the value-based purchasing and shared savings programs. Was I treated with adequate courtesy, was I well-informed of what was going on, and so on and forth. And the rules talk about that there will be more HCAHPS –related content [HCAHPS is the Hospital Consumer Assessment of Healthcare Providers and Systems program, from CMS]. And those measures have all been a part of the Hospital Compare.

And if you look at where the hospital industry commented, there were a lot of concerns about how much control the hospital really has, with some people questioning the validity of HCAHPS. And by the way, CMS had invested mega-money in HCAHPS, so they weren’t particularly thrilled with that feedback. And there was some discussion about the different populations hospitals serve, and there will be some challenges in meeting all their needs, and what if they don’t speak English, and that kind of thing. But CMS stuck by their guns in using HCAHPS in value-based purchasing, and there’s a long explanation in that final rule about why they chose not to change their stance on that. So it’s pretty clear that this stuff is here to stay. And it’s a whole domain in value-based purchasing.

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