(January 21, 2015): Starting this year, the Centers for Medicare and Medicaid Services (CMS) will have three Medicare quality and safety incentive programs go into effect. As a result, a number of hospitals across the U.S. will be penalized more than 3% on most of their CMS reimbursements.
I. Medicare Incentive Programs Now in Effect:
Three Medicare incentive programs focused on quality and safety issue that were established under the Affordable Care Act (ACA) that will take effect this year are the Hospital Value-Based Purchasing (VBP) Program, the Hospital Readmissions Reductions Program, and the Hospital-Acquired Condition (HAC) Reduction Program.
Beginning this year, under the Hospital Readmissions Reductions Program, hospitals can be penalized up to 3% of revenue for excessive 30-day readmissions. This is the highest amount allowed under the ACA, and is a significant increase from the readmission penalty in 2014, which was 0.35%.
Under the VBP program, CMS will withhold 1.5% of payments for all hospitals and distribute incentive payments based on performance. This program establishes bonuses and penalties that will be based on different quality indicators.
Finally, under the HAC Reduction Program, there will be a 1% penalty to any hospital that falls into the bottom 25% nationally for hospital-acquired conditions, such as urinary catheter or bloodstream infections and other issues related to patient safety.
II. Impact of Increased Penalties:
To show the effect these increased penalties will have on certain hospitals, Modern Healthcare conducted an analysis of CMS data and found that when the penalties associated with these three programs are combined, two hospitals in particular will have likely face reductions of more than 4% in reimbursements. The escalating penalties are receiving a lot of criticism from advocates for teaching hospitals and critical-access hospitals, which make up the biggest number of worst-performing hospitals. According to these advocates, CMS programs need to be refined to ensure they are not creating additional hardships. Members of the American Association of Medical Colleges (AAMC) say that AAMC hospitals are disproportionately affected by these penalties because by their very nature they take on more complex cases and are more likely to report bad outcomes. Therefore, their stance is that they should not be compared to and held to the same standards as hospitals with different types of patients and different types of procedures. Modern Healthcare also found that several academic medical centers were among the more heavily penalized hospitals in the nation. It is estimated that at least forty-two hospitals will face a combined penalty of 3% or higher on their 2015 Medicare revenue.
III. Improved Performance as a Result of New Programs:
While some healthcare providers will surely struggle as a result of increased penalties, many facilities have already improved their performance from year to year and face low penalty rates. In fact, about 800 of the nation's hospitals face either no penalties or will be earning rewards based on their performance in the value-based purchasing program.
There has been no suggestion from CMS that new rules or exceptions will be made for critical-access or academic medical centers who are disproportionately affected by increased penalties. Penalties are expected to increase over the years, having a large combined financial impact. By 2017, the combined penalties for HAC 30-day readmissions and value-based purchasing will put as much as 5.5% of inpatient Medicare payments at risk. If you have not already done so, we recommend that you carefully assess the impact these Medicare incentive programs will have on your facility.
Liles Parker attorneys represent health care suppliers and providers around the country in connection with regulatory compliance reviews, Medicare prepayment reviews and postpayment audits, HIPAA Omnibus Rule risk assessments, privacy breach matters, and State Medical Board inquiries. Robert W. Liles, Esq., is a Managing Partner at Liles Parker, Attorneys & Counselors at Law. Call Robert for a free consultation at 1 (800) 475-1906.