U.S. Healthcare reform is creating a fundamental shift away from the fee-for-service model to more coordinated care, leading to better outcomes and lowered spending. Starting this year, the financial viability of hospitals will depend on how well care is coordinated for Medicare beneficiaries.
A relatively little-known piece of the Affordable Care Act called the “Hospital Value-based Purchasing Program,” overseen by the Centers for Medicare and Medicaid Services, forces hospitals to improve their quality or make due with lower payments. The ACA program ties hospital performance, both clinical and patient satisfaction, directly to reimbursement rates. It’s a change that will have a significant impact — both good and bad — for all hospitals that treat Medicare patients.
Given the sway that Medicare has as a healthcare payer, the new regulations have critical importance and may instigate changes by private insurance and other third-party payers. HMOs will likely adopt similar metrics for payment to their healthcare providers.
Under the new CMS program, Medicare reduced its payments to all hospitals by 1 percent. The cut is believed to bring an estimated savings of $964 million. Additionally, CMS will begin scoring hospitals. Hospitals will be scored on how well they compare with others in the industry as well as how much they improve over time.
Hospital payments will be based on 12 clinical measures, including the effectiveness of treatment on heart disease, hospital-borne infections, pneumonia, diabetes and others. Seventy percent of the scores will be based on the clinical standards, while 30 percent will be determined by patient satisfaction surveys, which will include emergency room wait times and physician responsiveness, among others.
By 2017, the new value-based purchasing model will increase its penalty or bonuses by 2 percent. For most hospitals this is a significant number to the bottom line. Hospitals are not the only providers to be hit by CMS. Come 2015, the same concept will be applied to large physicians groups (100+ professionals), and by 2017 to all doctors.