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Value-Based Care News

55% of Hospitals Earn Incentive in Value-Based Purchasing Program

More hospitals in the Hospital Value-Based Purchasing Program will receive incentive payments than will receive value-based penalties in FY 2019, CMS reports.

Hospital Value-Based Purchasing Program and value-based payments

Source: Thinkstock

By Jacqueline LaPointe

- More hospitals participating in the Hospital Value-Based Purchasing (VBP) Program will see a Medicare payment increase in 2019, CMS recently reported.

The Hospital Value-Based Purchasing Program adjusts Medicare reimbursement to hospitals billing under the Inpatient Prospective Payment System (IPPS). CMS adjusts IPPS reimbursement upwards or downwards based on the quality of inpatient care provided to patients.

For the 2019 fiscal year (FY), CMS will adjust Medicare reimbursement upward for 55 percent of the approximately 2,800 participating hospitals based on their care quality.

The remaining hospitals will either see their Medicare payments decline or remain the same in FY 2019.

The previous fiscal year (FY 2018), about one-half of hospitals earned an incentive payment from the Hospital Value-Based Purchasing Program. The program also included about 200 more hospitals in FY 2018.

“The Hospital VBP Program is one of many quality programs Medicare has established to pay for the quality of care rather than the quantity of services provided to patients,” CMS wrote in the fact sheet. “This program is part of our long-standing effort to improve care across the entire healthcare delivery system, including hospital inpatient care, by tying Medicare payment to quality and cost measure performance. In FY 2019, more hospitals will receive positive payment adjustments than will receive negative payment adjustments.”

The 1,550 hospitals receiving higher Medicare payments in FY 2019 will receive a total of $1.9 billion in value-based incentive payments.

The value-based incentive payments stem from a two percent reduction in the base operating Diagnosis-Related Group (DRG) payment amounts otherwise applicable to a participating hospital for each discharge. CMS reduces the payments to participating hospitals and redistributes the funds based on care quality.

Hospitals are assessed on four equally-weighted categories: clinical care; safety; person and community engagement; and efficiency and cost reduction. Scores from each category are combined to create a Total Performance Score (TPS).

Average TPS scores across all participating hospitals increased in FY 2019. The scores rose to 38.1 points from 37.4 points in FY 2018, indicating improved hospital performance on care quality and value, CMS explained.

The federal agency also pointed out that, on average, rural hospitals excelled in the safety, person and community engagement, and efficiency and cost reduction categories, while urban hospitals performed better in the clinical care domain.

Rural hospitals earned an average TPS of 42.4 points, which was greater than the national average across all participating hospitals.

Smaller hospitals with fewer inpatient beds also notably performed better than their urban peers in the safety, person and community engagement, and efficiency and cost reduction categories. Urban hospitals, however, did better in the clinical care domain.

Large hospitals tend to fare worse than their smaller counterparts in the Hospital Value-Based Purchasing Program. Definitive Healthcare reported in 2016 that hospitals with about 260 staffed beds were more likely to receive a value-based penalty.

Value-based incentive payments or penalties under the Hospital Value-Based Purchasing Program hinge on a hospital’s TPS. CMS determines if a hospital receives an upward or downward adjustment based on how well the hospital performed compare to their peers, as well as how much the hospital has improved over time.

For FY 2019, CMS reported that the majority of the hospitals qualifying for a value-based incentive payment or penalty (60 percent) will only see their Medicare reimbursement change by a small amount. The payment change for the bulk of the hospitals will range from negative 0.5 percent to positive 0.5 percent.

The average net payment adjustment will be 0.17 percent for participating hospitals in FY 2019.

The average net increase in FY 2019 will be 0.61 percent, and the average net decrease will be negative 0.39 percent, CMS added. The highest positive payment adjustment will also be 3.67 percent and the lowest performing hospital will incur a reduction of 1.59 percent.

“Value-based purchasing is an important step to revamping how care and services are paid for, moving increasingly toward rewarding better value, outcomes, and innovations,” CMS concluded.

“As we more closely link patient outcomes and costs to value-based hospital payment, the Hospital VBP Program not only aims for quality gains on paper, it also aims to promote a culture that prioritizes quality and value of care and better empowers patients and their healthcare providers through the public display of program results. Additional FY 2019 program results will be publicly reported on the next update of the Hospital Compare website.”


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