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Principles of Healthcare Reimbursement

Third Edition

Chapter 10: Value-Based Purchasing

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Objectives

• To describe the origins and evolution of value-based purchasing and pay for performance

• To describe models of pay for performance

• To explain models of the Centers for Medicare and Medicaid Services

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Introduction: VBP and P4P Systems

• Spur interest in redesigning healthcare to focus on quality– Crossing the Quality Chasm– Rewarding Provider Performance: Aligning

Incentives in Medicare

• Pay for performance (P4P) and value-based purchasing (VBP) emerge as way to align payment incentives and quality

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Background

• Wide-spread movement toward quality and safety

• Link– Reimbursement (incentives, rewards)– Performance– Quality

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Background (cont.)

• P4P endorsed by large private employers and coalitions seeking to increase quality and safety in healthcare

• VBP implemented by federal reimbursement systems

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Background (cont.)

• Emerging distinctions between VBP and P4P– Cost

•VBP: Improve quality at some cost•P4P: Higher payments for better quality

– Setting•P4P: Private sector•VBP: CMS

– Duration•P4P longer than VBP

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Background (cont.): Definitions

• P4P (or PFP) systems:– Any type of providers’ payment system that is

based on performance and incentives– Quality assessed through evidence-based

measures

• VBP systems: – Purchasers hold providers accountable for

quality and cost

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Background: Definitions (cont.)

• Characteristics of VBP– Integrates information on quality and cost data– Focuses on managing use to reduce

inappropriate care– Identifies and rewards best-performing

providers

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Background (cont.): Purpose or Goals

• Goals– Reward provision of quality care– Improve quality of care– Control costs directly– Control costs indirectly

• Variations on these goals and sub-goals 2° unique missions and objectives

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History

• 1970s “Buy Right” program

• Fast growth since 2004

• 2005 >100 sponsoring entities– Health plans– Employer-payer coalitions– Medicare and Medicaid programs

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History (cont.): Private Sector

• Early 1970s Buy Right• 2000 Leapfrog Group• 2003 Bridges to Excellence (IOM’s

STEEEP)• 2003 Integrated Healthcare Association

(IHA) of California• 1990 National Committee for Quality

Assurance (NCQA) (HEDIS® indicators)

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History: Private Sector (cont.)

• Early programs targeted primary care physicians and HMOs

• Expansion to more types of medical specialists, PPOs, and hospitals

• Consumer involvement through reports and consumer-directed healthcare

• Increasing numbers and types of performance measures

• Added incentives

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History (cont.): Public Sector

• Medicare Payment Advisory Commission (MedPAC) reports– March 2003 (VBP – narrowly defined)– June 2003 (differential payment incentives)– June 2004 (recommended P4P)– March 2005 (VBP- expanded definition)– 2007-2008 (continued support)

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History: Public Sector (cont.)

• Implementations by state Medicaid systems– 2006, 28 states had P4P– Next 5 years, 15 more states– Multiple state Medicaid programs affected

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History (cont.): International Movement

• United Kingdom (UK)

• Canada

• Australia

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History (cont.): Growth

• Numbers– 2003, 39 P4P systems– 2004, 78 P4P systems– 2005, >170 Fortune 500 companies and other large public and private purchasers representing 36 million enrollees

– 2009, BTE recognized efforts of ~14,000 physicians and ~2,700 physician practices ($12.4 million in rewards)

• Wide-range of Sponsoring Organizations (2004)– Health plans (54)– State Medicaid programs (9)– Employers (6)– CMS demonstration projects (5)

– Other (4)

• CMS major influence in growth in public sector

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History (cont.): Research on Impact

• Research studies lacking on specific aspects of P4P and VBP systems– ROI research scarce– Site specific studies

• Well-conducted research needed

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Advantages and Disadvantages

• Advantages– Commitment to quality– Infrastructure to report quality

– Transparent reward process

– Ability to focus on underserved or high-risk groups

• Disadvantages– Not evidence-based (lack of literature)

– Potential for unintended consequences

– Lack of common model– Success to difficult to measure

– Money could be spent on proven interventions

– Potential that “success” is better documentation rather than truly better care

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Major Categories of Models

• Determinants– Recipient of reward or penalty• Individual• Group• Region• Hospital

– Mechanism of payment

• Categories– Reward-based– Penalty-based

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Operations: Allocation and Reward of Incentives

• Fairness and transparency

• Attribution (enrollee or beneficiary assignment)– Who rendered the care?– Who receives the reward or penalty?

• Many attribution algorithms– Single– Multiple

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Operations (cont.) Incentives

• Positive Incentives (Rewards)– Financial

• Bonus• Higher fee structure

– Nonfinancial• Public recognition• Reputation

• Negative Incentives (Penalties)– Financial

• Lowered bonus• Reduced payment

– Nonfinancial• Poor public report card

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Operations: Incentives (cont.)

• Sufficient to induce changes in behavior

• Amounts vary by type of measure achieved– Quality v. administrative– Clinical v. cost efficiency

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Operations (cont.): Method of Implementation - Incremental

• Measures tested before wide-scale dissemination

• Preparation time• Evaluation of policies, procedures, and

results on small scale• Pilot projects• CMS’ method

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Operations (cont.): Targets

• Most significant problems– Quality– Cost

• Proportion of population covered– Service– Provider

• Availability of valid and reliable measures

• Other

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Operations (cont.): Performance Measures• Characteristics

– Reliable• Time• Site• Data Collectors

– Valid• Clinically relevant• Scientifically sound

• Types– Structure– Process– Outcome

• Sources– Joint Commission– National Quality Measures

Clearinghouse– National Quality Forum– National Committee for Quality

Assurance– Hospital Quality Alliance– AQA Alliance– AHRQ– Leapfrog– Specialty medical associations

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Operations (cont.): Information Systems

• Internal informational systems– Clinical data capture– Administrative databases– Provider surveys– Patient surveys– Longitudinal claims data

• Infrastructure of health information technology

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CMS – Linking Quality to Reimbursement

• CMS VisionThe right care for every person every time

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Value Based Purchasing

• Mandated by the DRA (2005)– CMS must implement a VBP plan for IPPS beginning

in FY 2009

• Established numerous demonstration projects– Hospital inpatient setting– Physician services– Skilled nursing facilities– Home health arena– Dialysis centers

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Value Based Purchasing

• The VBP plan must consider:– The ongoing development, selection, and modification process

for measures of quality and efficiency in hospital inpatient settings

– The reporting, collection, and validation of quality data

– The structure of payment adjustments, including the determination of thresholds of improvements in quality that would substantiate a payment adjustment, the size of such payments, and the sources of funding for the payments

– The disclosure of information on hospital performance

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Value Based Purchasing

• CMS has published a Roadmap for Implementing Value-driven Healthcare in the Traditional Medicare Fee-for-Service Program.– See http://www.cms.hhs.gov/QualityInitiativesGenInfo/.

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Value Based Purchasing

• Roadmap discusses the following types of programs:– Pay for reporting– Pay for performance– Paying for value

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Pay for Reporting

• MMA 2003 established– Reporting of Hospital Quality Data for Annual

Payment Update (RHQDAPU)– Failure to participate results in 2% reduction in

annual payment update for hospital IPPS• Started as a 0.4% reduction was expanded to 2% by Deficit

Reduction Act (DRA)

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Reporting of Hospital Quality Data for Annual Payment Update (RHQDAPU)

• Started with 10 quality measures for three clinical areas– Heart attack– Heart failure– Pneumonia

• Expanded by the DRA for FY 2007 to include 21 measures– Added Surgical Care Infection Prevention as a category

• Expanded in FY 2008 to include a 3-day mortality rate for pneumonia in Medicare patients

• For FY 2010 there are 41 measures

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Hospital Outpatient Quality Data Reporting Program

• Tax Relief and Health Care Act of 2006 (MIEA-TEHCA) expanded the quality reporting program– Hospital outpatient departments (CY 2009 HOPPS

update)– Ambulatory Surgical Centers (delayed due to ASC

PPS revisions)

• Outpatient based quality measures are different from the inpatient measures

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Hospital Outpatient Quality Data for Annual Payment Update Program

• HOP QDRP– Currently 7 quality measures

• 5 emergency department • 2 peri-operative care

– In order to receive full annual payment update for CY 2010 hospitals had submit data on these 7 measures effective with hospital outpatient services furnished on or after April 1, 2009

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Hospital Outpatient Quality Data for Annual Payment Update Program

• Proposed measures for HOP QDRP• Imaging Efficiency

– OP-8: MRI Lumbar spine for low back pain– OP-9: Mammography follow-up rates– OP-10: Abdomen CT – Use of contrast material

• OP-10a: CT abdomen – Use of contrast material excluding calculi of the kidneys, ureter, and/or urinary tract

• OP-10b: CT abdomen – Use of contrast material for diagnosis of calculi in the kidneys, ureter, and/or urinary tract

– OP-11: Thorax CT – Use of contrast material

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The Physician Quality Reporting Initiative (PQRI)• TRHCA required that CMS establish a pay-for-

reporting system for professionals. • PQRI started in 2007 and includes an incentive

payment for professionals who satisfactorily report data on included quality measures

• In 2007, seventy-four quality measures were available under PQRI

• Each year the number of measures under this program has risen – In 2009 there are 153 measures from which professionals can select for 2009 PQRI reporting

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Pay for Performance

• After establishing the need to collect data on quality measures comes the need to pay for quality performance

• CMS investigated pay-for-performance through the Premier Demonstration

• The success of this demonstration project was reported to Congress in 2007 – In this report CMS supports the introduction of broad VBP payment policy for hospitals which includes payment for quality performance

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Premier Hospital Quality Incentive Demonstration (HQID)

• Demonstration project provides financial rewards to those facilities which demonstrate high quality of care in established clinical areas

• Goal—to identify if providing financial incentives for quality improvements does in fact result in significant advancement in the quality of inpatient care

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Premier Hospital Quality Incentive Demonstration (HQID)

• Over 260 Premier Hospitals participating

• Five clinical areas:– Heart attack– Heart failure– Pneumonia– Coronary artery bypass graft– Hip and knee replacements

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Premier Hospital Quality Incentive Demonstration (HQID)

• Results– During the first year of the demonstration project

• CMS awarded 8.85 million in bonus payments

• Quality of care improved in all five clinical areas

– During the second year of demonstration• CMS awarded $8,690,477 in incentive payments to 115

top-performing hospitals

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Paying for Value

• In order to move to a mature VBP program, CMS desires to pay for value– to promote efficiency in resource use while providing high-quality care

• To achieve this goal, CMS will create efficiency models that inform providers about the value of their care delivery – first step, CMS established the hospital-acquired conditions provision in the acute care inpatient setting

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Hospital Acquired Conditions

• Section 5001(c) of Pub.L. 109-171 (DRA) requires the Secretary to identify, by Oct 1, 2007 (FY 2008) at least two conditions that are:– High cost or high volume or both– Result in the assignment of a case to a DRG that has

a higher payment when present as a secondary diagnosis

– Could reasonably have been prevented through the application of evidence-based guidelines

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Hospital Acquired Conditions

• CMS finalized eight conditions for the HAC provision– Lower weighted MS-DRG payment will be made

when one of the conditions on the HAC list is acquired while the patient is hospitalized. (If no other CC/MCCs are present)

– Present on Admission indicator will be used to determine if the condition was hospital-acquired

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Hospital Acquired Conditions

• Catheter associated urinary tract infections• Pressure ulcers• Serious preventable event – Object left in surgery• Serious preventable event – Air embolism• Serious preventable event – Blood incompatibility• Vascular catheter-associated infections• Mediastinitis after coronary artery bypass graft (CABG)• Falls and Fractures, Dislocations, Intracranial Injury,

Crushing Injuries and Burns

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Summary

• VBP and P4P systems link financial rewards and provision of quality healthcare

• Focus is on significant problems

• Use of reliable and valid measures

• Incentives and information systems are key aspects of implementation

• CMS demand for “right care for every person every time” supported by “legislation and regulation