What to Look for in This Year’s Value-Based Purchasing Results

In the next few days, CMS will release data to the public on how thousands of the nation’s hospitals have fared during the third year of Medicare’s Hospital Value-Based Purchasing (HVBP) program. The program offers incentive payments – and penalties – to hospitals based upon their demonstration of excellence across several clinical, efficiency, and patient experience metrics. This year’s scores will affect hospital payment for federal fiscal year 2015 (Oct 1, 2014 – September 30, 2015). Even though the full results are not available yet, there are three new things that make this year’s program very different from HVBP in previous years:

Hospitals will be rewarded for doing more with less. This year, for the first time, CMS will incorporate an efficiency measure into its scoring for HVBP. A full 20% of a each hospital’s incentive payments will be tied to a measure of how much CMS spends on average under Medicare Parts A & B for a patient’s treatment during an episode of care (starting 3 days prior to admission and ending 30 days after discharge).

More money is at risk. This year, Medicare will make 1.5% of hospital reimbursement subject to the HVBP (up from 1.25% last year). This move to make more of a hospital’s spend subject to the program, and is consistent with the Affordable Care Act’s requirement that eventually 2.0% of the base payment for each Diagnosis Related Group (DRG) being tied to value-based incentives.

Improvements have bigger payoffs. CMS has not yet released data on how hospitals will perform, but it has released its formula on how quality improvements will translate into incentive payments. Over the past two years, CMS has calculated each hospital’s total performance score for HVBP, which can range from 0-100 based on how well hospitals do on each of the individual metrics. The total performance score is then plotted on a line like the example below to determine how much a hospital earns under HVBP.

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With the HVBP affecting more hospital reimbursement this year, the line steepens and the return on investment for increasing score, gets larger and larger.

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With the HVBP affecting more hospital reimbursement this year, the return on investment for increasing score, gets larger and larger. That means that every improved HCAHPS dimension affects your bottom line over 40% more than it did two years ago. Over the next two years, we can expect this number to grow and, given the popularity of similar methods in the commercial market, we can expect that the evolution in value-based purchasing to be a key industry trend to watch.

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