Case Management

Mentor moment: CMS issues proposed rule on value-based incentive payments to acute care hospitals under the IPPS

Case Management Weekly, January 19, 2011

Editor’s note: Judith Kares, JD, CPC, regulatory specialist for HCPro, Inc., wrote the following post for the Medicare Weekly Update e-newsletter. 

As part of its continuing efforts to forge a closer link between Medicare’s payment systems and improvement in healthcare quality, CMS recently published a proposed rule to provide value-based incentive payments to those acute care hospitals that meet relevant requirements.  These incentive payments are to be incorporated into the IPPS (which is the principal acute care hospital payment methodology) effective for discharges on and after the beginning of FY 2013 (10/1/12).

As stated in a related fact sheet issued at the same time, “The transition of these [quality] initiatives to value-based purchasing is intended to transform Medicare from a passive payer of claims based on volume of care to an active purchaser of care based on the quality of services its beneficiaries receive.”  The proposed hospital value-based purchasing program (the “Hospital VBP”) would provide value-based incentive payments to hospitals based on their achievement, or improvement, on a set of specific quality measures. These measures are designed to foster improved clinical outcomes, as well as to improve the overall quality of the inpatient experience from the patient’s perspective.

Under the Hospital VBP, CMS would evaluate a hospital’s performance during an identified performance period based on achievement or improvement relative to performance standards established for that period. Those hospitals that met the standards established for that period would receive incentive payments going forward.  These incentive payments would be funded through a reduction in base operating DRG payments for all hospital discharges, beginning with a 1% reduction to base operating DRG payments in FY 2013 and rising to a 2% reduction by FY 2017.

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