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MedPAC mulls reforming the hospital inpatient quality landscape: 5 key takeaways

October 26, 2017

    We recently attended the Oct. 6 meeting of the Medicare Payment Advisory Commission (MedPAC), where the agency presented the first draft of a plan to simplify and consolidate Medicare's array of inpatient value incentive programs.

    As a refresher: MedPAC is an independent agency that advises Congress on issues affecting the Medicare program. MedPAC consists of staff researchers and a 17-member commission representing different areas of the health care industry.

    MedPAC often makes recommendations to Congress to implement new policies and improve existing ones. Congress and CMS are not compelled to act on these recommendations. Nonetheless, MedPAC has influenced some key developments, including the Hospital Readmissions Reduction Program, to name one major example.

    Hear our 2018 Medicare payment update for hospital inpatient payments

    MedPAC discusses eliminating HAC and IQR, combining VBP and HAC

    At the Oct. 6 meeting, MedPAC unveiled some ideas that would effectively reform the hospital inpatient quality landscape. Specifically, it called for:

    • Eliminating Medicare's Inpatient Quality Reporting Program (IQR) and Hospital-Acquired Conditions Reduction Program (HACRP); and
    • Combining the Value-Based Purchasing Program (VBP) and Hospital Readmissions Reduction Program (HRRP) into a single pay-for-performance program, the Hospital Value Incentive Program (HVIP).

    MedPAC commissioners enthusiastically debated the specifics, but there was consensus that the plan would be a step in the right direction toward a reduced quality reporting burden and clearer incentives for quality improvement through pay-for-performance (P4P).

    Top takeaways from the discussion

    The Oct. 6 meeting was heavy on technical detail, but we've laid out five highlights:

    1. Some hospitals could see reduced P4P financial impact under the Hospital Value Incentive Program

    HVIP offers the potential for incentive payments alongside a smaller penalty opportunity: The proposed revised HVIP would result in a maximum 2% hospital penalty, whereas the current P4P programs result in a maximum 6% penalty. The HVIP would be designed as a budget-neutral program, redistributing payments from low performers to high performers. Thus, there would be an opportunity to earn incentive payments in the program.

    Financial adjustments would be partially determined based on a hospital's proportion of low-income patients. The determination of a hospital's financial adjustment as a result of quality performance would hinge in part upon a hospital's proportion of dual-eligible Medicare stays. This approach could lower penalties for some safety-net hospitals, especially those in Medicaid expansion states.

    Absolute performance targets would provide hospitals with concrete performance improvement goals. HVIP would feature predetermined performance targets, and hospitals working to meet those targets would see financial incentives from their quality improvement. This is in contrast to the current P4P programs, in which providers are retroactively ranked according to the performance of the whole cohort and rewarded according to their ranking—meaning that a hospital can work to improve performance and still never receive a reward. 

    2. Medicare inpatient quality measures would narrow to just four, reducing hospitals' quality reporting burden.

    Currently, CMS requires hospitals to report certain metrics from more than 70 available measures through the IQR, 19 of which impact payment through the P4P programs. Under MedPAC's HVIP, hospitals' payment would be impacted by assessment on just four measures:

    • 30-Day Readmissions (all-condition);
    • 30-Day Mortality (all-condition);
    • Spending (Medicare Spend per Beneficiary); and
    • Patient experience (HCAHPS).

    The reduction in the number of measures would significantly reduce hospitals' quality reporting burden. Out of the four measures listed above, hospitals would only need to report the HCAHPS measure set as CMS would derive the performance of the other three measures from claims, which require no additional data submission.  

    3. Condition-specific measures would be replaced by all-condition measures, so more hospitals would qualify for evaluation.

    The HVIP's all-condition mortality and readmissions rates would assess a larger volume of cases than the VBP and HRRP's condition-specific measures. Some hospitals that do not meet minimum reporting requirements for these measures under the current VBP and HRRP might be eligible for assessment under the HVIP.

    4. HAIs would no longer impact reimbursement through P4P. 

    MedPAC did not incorporate payment incentives related to hospital-acquired infections (HAIs) into the HVIP, in part to avoid penalizing hospitals for improving HAI detection and reporting. Some MedPAC commissioners expressed concern about the removal of HAIs from P4P. Expect further discussion on this point if the HVIP conversation continues at MedPAC.

    5. The Oct. 6 meeting was simply a public discussion, and the HVIP has not yet been officially recommended by MedPAC. Even if recommended, the HVIP would not necessarily be adopted. MedPAC will continue to work on the plan and might make big changes before bringing it forward for further discussion with the Commission. And even if the plan does become a formal MedPAC recommendation, Congress and CMS are not obligated to act on it soon (or ever).

    Although CMS is not compelled to act on recommendations that MedPAC makes, MedPAC has historically been a central actor in health care industry developments. Advisory Board will be watching closely to see how this discussion continues.

    We do not anticipate any immediate change that would impact the programs in 2017 or the near future. Thus, to prevent the reduction in Medicare Part A reimbursement, we recommend that hospitals continue to comply with the existing quality reporting requirements under the IQR program.

    Those interested in a deeper look at the October 6th meeting can find slides from the session online.


    See highlights from the Inpatient Prospective Payment System final rule

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