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Reactions to CMS' P4P proposal run gamut

Quality Improvement Monitor, January 18, 2008

CMS' plan to reduce Medicare payments by 2%-5% and allow hospitals to "buy back" the money through top-notch performance or dramatic improvement has prompted plaudits from some, disappointment from others, and confusion from critics.

The federal agency in November 2007 submitted its value-based purchasing program (VBP)-also known as pay for performance (P4P)-proposal to Congress. The proposal would reduce diagnostic-related group (DRG) payments by 2%-5% for Medicare patients.

"One way to think of it is that the base DRG rate [would be] reduced, and the hospitals would buy back that incentive payment," said CMS Acting Administrator Kerry Weems in a conference call announcing the proposal. "And the incentive payment would be restructured so that we're not just rewarding high-performing hospitals, but it could also be adjusted so that if a hospital is improving significantly, even if [it is] a lower performer, if [it is] improving significantly, it could also get an incentive payment."

However, the American Hospital Association (AHA) says questions remain about how that buyback would actually work. "At this point, it is difficult to judge what Congress will do with the proposal, as [it] will likely have to pick and choose from the options presented," says Elizabeth Lietz, AHA spokesperson. "The AHA does have concerns regarding the proposed payment cuts. A 2%-5% reduction in hospital payments would significantly impact hospitals and patients, and it's unclear how or if that funding would be returned to hospitals."

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