Articles on Compliance Strategies

Featured Health Business Daily Story December 17, 2007

CMS Plans to Hold Back 2% to 5% of DRG Reimbursement and Allow Hospitals to Earn It Back By Achieving Quality Goals

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on false claims, overpayments, compliance programs, billing errors and other Medicare compliance issues.

About a month after a major overhaul of DRGs took effect, CMS is proposing another one, and this time it's about seeing more proof of quality care before Medicare pays full freight for it. CMS wants to hold back 2% to 5% of DRG reimbursement and then give hospitals the chance to earn it back by improving their care or crossing specific quality thresholds, according to a 104-page report presented to Congress Nov. 26 (see box, below).

This new "value-based purchasing" plan would also make data available to consumers on how well hospitals perform on core quality measures (e.g., how soon pneumonia patients are given an antibiotic).

Value-based purchasing, which requires congressional approval, would be a step beyond CMS's existing pay-for-performance programs. For example, "Reporting Hospital Quality Data for Annual Payment Update" (RHQDAPU) uses carrot-and-stick payments to motivate hospitals to report to CMS on a defined set of inpatient-care performance measures (e.g., how soon heart attack patients get aspirin after arriving at the emergency department). It started in fiscal year (FY) 2005, with the potential for hospitals to lose 0.4% of their DRG payment for not giving CMS data on 10 performance measures.

The Deficit Reduction Act expanded RHQDAPU (also known as Hospital Compare) in FY 2007 and after, the report states. The differential payment was increased to 2%, and CMS was directed to adopt Institute of Medicine baseline hospital measures, including 22 Hospital Quality Alliance measures. For FY 2007, hospitals submitted 11 clinical process-of-care measures in addition to the original 10, and in FY 2008 they will give six more: the HCAHPS survey of patients' perspectives of care, three surgical-care infection-prevention measures and two 30-day mortality measures for acute myocardial infarction and heart failure. The total: 27.

And now CMS wants to take pay-for-performance a step farther. While RHQDAPU emphasized reporting, value-based purchasing links payment to improvements in clinical quality, patient-centeredness and efficiency, the report states.

Former OIG attorney Paul Danello worries that CMS's value-based purchasing proposal is just a back-door Medicare spending cut.

"This is a good idea beginning to get seriously off track," says Danello, who is now with the Washington, D.C., law firm Squires, Sanders & Dempsey LLP. "All hospitals will have an across-the-board reduction in reimbursement of 2% to 5%. Hospitals that maintain certain quality-performance standards can earn back money taken away from them. That is decidedly not the premise on which quality payment should.recognize superior performance. You shouldn't have to work twice as hard to get back to where you were normally."

And he wonders how hospitals already struggling financially would survive this blow.

Danello says hospitals should receive rewards for improving quality, which was the premise of CMS's pay-for-performance pilot and is typical of private-sector initiatives.

Beware Perils of Reporting Bad Data

It's unclear from the report exactly how the plan would work. But according to CMS, here are a couple of the main features of the plan:

• A measure development and selection process.
• "Performance Assessment Model that incorporates quality measures, including clinical process of care, patient perspectives of care, and clinical outcomes, to calculate a hospital's Total Performance Score." Hospitals are scored on their performance on each measure during a one-year period "based on the higher of 'attainment' compared with national thresholds and benchmarks or 'improvement' compared with the hospital's own performance in the preceding 12-month baseline period."
• Incentives conditioned on performance, which will be based on a percentage of the base operating payment for all discharges. "The percentage of incentive earned would be determined by the hospital's Total Performance Score," CMS says.
• Enhancements to the Medicare Hospital Compare Web site to support expanded and more user-friendly public reporting.
• Ongoing evaluation and monitoring efforts to assess experiences early in value-based purchasing implementation, allowing for timely corrective action and building the evidence base for future value-based purchasing programs in other settings.

Data integrity is essential to this process. Former Associate U.S. Attorney Jim Sheehan, a national leader in health fraud enforcement, has warned that hospitals that fudge their RHQDAPU data put themselves at risk because it's a false claim to knowingly report misinformation to collect Medicare reimbursement. For example, hospitals that report to CMS that they didn't give aspirin to any myocardial infarction patients in the emergency department because there were no such patients during that reporting period will be viewed suspiciously because obviously chest pain is one of the most common reasons people present to the hospital.

View the proposal at www.cms.hhs.gov/center/hospital.asp.

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