Using reimbursement incentives to promote improved quality of care and reduce program costs isn’t new to the Centers for Medicare and Medicaid Services (CMS). During the past several years, CMS has implemented a variety of pay-for performance programs that it hopes will improve quality by financially rewarding providers who meet certain performance expectations.

These programs generally distribute bonus payments or differential updates to providers who either achieve specific quality benchmarks or demonstrate improvements from year to year. Embracing the belief that financial rewards — and sometimes penalties — are among the most powerful tools for bringing about behavior changes, CMS has announced plans to implement two new programs starting in October 2008.

POSITIVE INCENTIVE PROGRAM
CMS is authorized to develop a value-based purchasing (VBP) plan starting in October for Medicare services provided by hospitals paid under the inpatient prospective payment system (IPPS). By law, the plan must include the development and selection of measures of quality and efficiency in inpatient settings; the reporting, collection and validation of quality data; the structure, size and source of value-based payment adjustments; and the disclosure of information on hospital performance.

Late last year, CMS published a report discussing its plan to implement a Medicare hospital VBP program. CMS suggested building on an existing Medicare program that provides differential payments to hospitals that meet certain requirements, such as publicly reporting performance on a defined set of inpatient care performance measures. CMS will phase out the existing program and replace it with a new program that will make a portion of hospital payment contingent on actual performance-specified quality measures.

CMS recommended the VBP plan include these basic components:

• A performance assessment model that scores a hospital’s performance on a specified set of measures, generating a total performance score for each hospital,
  
  
• Translation of the VBP total performance score into an incentive payment,
  
  
• A measure development process, including selection criteria for choosing performance measures for the financial incentive, and candidate measures for the VBP program start,
  
  
• A phased transition from the existing program to the new VBP,
  
  
• Redesigned data submission and validation infrastructure to support the VBP program requirements, Enhancements to the existing Web site to support expanded public comments,
  
  
• An approach to monitoring VBP effects, including potential outcomes on health disparities.

Even though the specific details of the VBP program haven’t been formally adopted yet, it seems clear that CMS intends to incorporate VBP initiatives into the IPPS in the near future.

NO PAYMENT FOR "NEVER EVENTS"
” Under the second program, beginning Oct. 1, 2008, Medicare will no longer reimburse hospitals for eight conditions that are acquired by patients while in the hospital and, in CMS’s opinion, could have been prevented. These types of conditions are often referred to as “never events” based on the theory that these events should never occur because they can be prevented with implementation of certain measures by providers.

By law, CMS was required to designate at least two hospital-acquired conditions that will prevent assignment of a hospital stay to a higher paying diagnosis-related group (DRG) unless the hospital can document that the condition was present at the time of admission. To be designated as such, the hospital-acquired conditions must:

• Be associated with high cost or high volume or both,
  
  
• Result in the assignment of a case to a DRG that has higher payment when present as a secondary diagnosis, and
  
  
• Have been reasonably preventable through the application of evidence-based guidelines.

Applying these criteria, CMS, in the 2008 IPPS, set forth the following eight hospital-acquired conditions that it will not reimburse if the condition was not present at admission:

1. Serious preventable event — object left in surgery,
   
   
2. Serious preventable event — air embolism,
   
   
3. Serious preventable event — blood incompatibility,
   
   
4. Catheter-associated urinary tract infections,
   
   
5. Pressure ulcers,
   
   
6. Vascular catheter-associated infections,
   
   
7. Surgical site infections — mediastinitis after coronary artery bypass graft surgery, and
   
   
8. Hospital-acquired injuries — fractures, dislocations, intracranial injury, crushing injury, burn, and other unspecified effects of external causes.

CMS also announced it intends to include three additional hospital-acquired conditions in the 2009 IPPS: ventilator associated pneumonia, staphylococcus aureus septicemia and deep-vein thrombosis/pulmonary embolism.

ARE YOU PREPARED?
This October will be a busy month for the CMS as the VBP program takes shape and the “never event” program begins. Hospitals may wish to implement screening procedures to rule out on admissions the conditions that are flagged by CMS as preventable hospital-acquired conditions.

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