Becker's Hospital Review

Financial Management 39 CMS: 1,451 Hospitals Penalized in 2014 Value-Based Purchasing Program By Bob Herman F or fiscal year 2014, more than half of all hospitals within CMS' Hospital Value-Based Purchasing program will lose some portion of their Medicare reimbursements. The Patient Protection and Affordable Care Act established the VBP program. For FY 2014, this meant CMS took back 1.25 percent of Medicare reimbursements at hospitals paid under Medicare's inpatient prospective payment system. The resulting $1.1 billion would then be dispersed to hospitals based on how well they performed on healthcare quality measures, like treatment of heart attacks and congestive heart failure, as well as patient satisfaction. Patrick Conway, MD, chief medical officer of CMS, wrote a blog post advertising the results. He said more than 1,300 hospitals will "essentially break even" over the course of this year, defining "break even" as Medicare reimbursements increasing no more than 0.2 percent or decreasing no more than 0.2 percent. About 630 hospitals will receive a bonus of more than 0.2 percent, while 778 hospitals will lose more than 0.2 percent of their Medicare pay. Jordan Rau, a staff writer at Kaiser Health News, has followed the government's VBP and readmissions reduction programs since their inception, and he drilled down into CMS' results further. Overall, 1,451 hospitals will be paid less this year under Medicare's VBP program, be it a small or large penalty. This total is similar to last year, which was the first installment of VBP. Higher payments will be doled out to 1,231 hospitals. Compared with last year, the average penalty rose from 0.21 percent to 0.26 percent. At least 60 percent of hospitals in Maine, Massachusetts, Nebraska, New Hampshire, North Carolina, Utah and Wisconsin received higher Medicare payments under this year's VBP program. Hospitals in California, Connecticut, Nevada, New Mexico, New York, North Dakota, Washington and Wyoming did not fare as well, as at least two-thirds in each state will see lower reimbursement rates. Dr. Conway of CMS said in his blog post that the second year of VBP is leading to better quality overall and is helping the U.S. healthcare system shift away from fee-for-service. "As the Hospital Value-Based Purchasing program continues to evolve with a richer set of measures, including an efficiency measure in FY 2015, we may see the mix of value-based payment adjustment factors change again," Dr. Conway wrote. "Meanwhile, value-based purchasing in Medicare continues to move ahead, improving the way that healthcare is delivered to people with Medicare now and helping create a healthcare system that will ensure quality care for generations to come." n OIG: High Hospital Charges Lead to Excessive Medicare Outlier Payments By Bob Herman A report from the HHS Office of Inspector General shows high charges at hospitals directly influence a supplementary Medicare payment, thus leading to billions of inflated revenue. Under Medicare's inpatient prospective payment system, or IPPS, hospitals receive a set payment based on the type of Medicare severity diagnosisrelated groups that are recorded. Hospitals receive adjusted Medicare reimbursements based on several factors, such as their geographic area wage index and whether they provide training to medical residents. Hospitals also make supplemental payments called "outlier payments," which cover hospitals from "large financial losses because of unusually expensive cases," according to the report. The OIG found that almost all IPPS hospitals in the U.S. (97 percent, or about 3,200) receive an outlier payment. From 2008 through 2011, CMS doled out $15.8 billion in outlier payments, or about 2 percent of hospital Medicare bills. The average outlier payment alone was $15,482, and some exceeded $50,000 for a single MS-DRG. One unnamed hospital received a $1.4 million outlier payment for a single tracheostomy claim. Further, OIG analysts identified a small group of 158 hospitals that received a high amount of outlier payments. For those hospitals, 12.8 percent of their Medicare reimbursements were tied to outlier payments. One culprit behind the excessive payments? High charges, the OIG said. The high-outlier hospitals charged Medicare 42 percent more, on average, for the same treatments and diagnoses compared with other hospitals. Highoutlier hospitals were also more likely to be larger, urban teaching hospitals. The OIG did not identify specific high-outlier hospitals. OIG officials immediately recommended CMS to instruct Medicare administrative contractors and recovery auditors to monitor outlier payments. In addition, the OIG wants CMS to add hospital outlier payments to its public reporting and examine the necessity of some MS-DRGs with high rates of outlier payments. CMS agreed with all three recommendations. n Becker's Hospital Review 5th Annual Meeting May 15-17, 2014 Swissôtel • Chicago, Illinois Co-Chaired by Chuck Lauer and Scott Becker 100+ sessions and 190+ speakers Register by April 1 for Early Registration Discounts For more information visit, www.BeckersHospitalReview.com and click on "Conferences."

• Cover