1. © 2011 Principles of Healthcare Reimbursement Third Edition Chapter 10: Value-Based Purchasing

2. © 2011 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

3. © 2011 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

4. © 2011 Background Wide-spread movement toward quality and safety Link –Reimbursement (incentives, rewards) –Performance –Quality

5. © 2011 Background (cont.) P4P endorsed by large private employers and coalitions seeking to increase quality and safety in healthcare VBP implemented by federal reimbursement systems

6. © 2011 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

7. © 2011 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

8. © 2011 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

9. © 2011 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

10. © 2011 History 1970s “Buy Right” program Fast growth since 2004 2005 >100 sponsoring entities –Health plans –Employer-payer coalitions –Medicare and Medicaid programs

11. © 2011 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)

12. © 2011 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

13. © 2011 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)

14. © 2011 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

15. © 2011 History (cont.): International Movement United Kingdom (UK) Canada Australia

16. © 2011 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

17. © 2011 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

18. © 2011 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

19. © 2011 Major Categories of Models Determinants –Recipient of reward or penalty Individual Group Region Hospital –Mechanism of payment Categories –Reward-based –Penalty-based

20. © 2011 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

21. © 2011 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

22. © 2011 Operations: Incentives (cont.) Sufficient to induce changes in behavior Amounts vary by type of measure achieved –Quality v. administrative –Clinical v. cost efficiency

23. © 2011 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

24. © 2011 Operations (cont.): Targets Most significant problems –Quality –Cost Proportion of population covered –Service –Provider Availability of valid and reliable measures Other

25. © 2011 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

26. © 2011 Operations (cont.): Information Systems Internal informational systems –Clinical data capture –Administrative databases –Provider surveys –Patient surveys –Longitudinal claims data Infrastructure of health information technology

27. © 2011 CMS – Linking Quality to Reimbursement CMS Vision The right care for every person every time

28. © 2011 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

29. © 2011 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

30. © 2011 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/.

31. © 2011 Value Based Purchasing Roadmap discusses the following types of programs: –Pay for reporting –Pay for performance –Paying for value

32. © 2011 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)

33. © 2011 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

34. © 2011 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

35. © 2011 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

36. © 2011 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

37. © 2011 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

38. © 2011 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

39. © 2011 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

40. © 2011 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

41. © 2011 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

42. © 2011 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

43. © 2011 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

44. © 2011 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

45. © 2011 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

46. © 2011 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