Care Transformation Center Blog

Updated: Pay-for-performance data from around the nation

by Eric Fontana

Last week, a new Moody’s report showed slowing hospital revenue growth in 2013, partially due to Medicare rate cuts.

Unfortunately for some hospitals, there may be little relief in sight in FY 2015, which marks the kickoff of the hospital-acquired condition (HAC) penalties. Under this program, the worst performing hospitals in the nation can expect to lose a full 1% of their inpatient Medicare reimbursement.

When you consider all three pay-for-performance programs, each hospital has 5.5% of their inpatient Medicare reimbursement at risk in FY 2015.

Our new map charts the estimated pay-for-performance penalties for every hospital in the U.S. These penalties have been released by CMS in conjunction with recent regulations—the final rule for value-based purchasing and readmissions, and the proposed rule for HAC, as CMS did not publish HAC penalties in the final rule.

Click, drag, and zoom to see the estimated net P4P impact on FY 2015 Medicare revenues for any institution, color-coded by severity (red represents a net Medicare revenue impact of greater than one percent, for example). You can also open the map in a new browser to view it in full size.

Please note the adjustments factors in this map do not represent the final P4P adjustments. CMS is expected to release the final factors in October.

FY 2015 P4P Penalty Impact Map

Read on to get three takeaways from this analysis and join me on Sept. 10 at 3 p.m. ET for an in-depth discussion on each of these programs.

1. New readmissions conditions drive more penalties

In FY 2015, CMS will introduce chronic obstructive pulmonary disease and hip/knee arthroplasty (THA/TKA) into the readmissions program. These conditions will have an immediate impact on penalties.

For example, the new THA/TKA measure will cause 219 hospitals to receive a readmissions penalty that otherwise would not. A handful of these facilities will jump from no readmissions penalties in FY 2014 to a full 3% in FY 2015. Not surprisingly, several of these are orthopedics hospitals.

Jon Lemke, Chief Biostatistician at Genesis Health System, shared an interesting analysis with me showing that when a hospital only has enough volumes to qualify for the readmissions program based on THA/TKA patients, they have a much higher relative risk (12.26) of receiving a max penalty compared to other hospitals.

Organizations with significant volumes of unplanned THA/TKA readmissions will be especially impacted as the national readmission rate is much lower than other conditions in the program, meaning the per case impact of each unplanned readmission will be more significant than an AMI or HF readmission.

2. Few hospitals can offset P4P losses with a VBP bonus

Back in FY 2013, when readmissions and VBP were first introduced, hospitals had a far better chance to offset any readmissions losses, which were capped at a maximum of 1%, with a VBP bonus.

Now, with the readmissions program moving to a 3% maximum penalty and the HAC program imposing an additional 1%, that's becoming increasingly difficult. While we don't have the final numbers from CMS just yet (they are set to be released in the coming weeks), an estimated 272 facilities (around 8%) will receive a VBP bonus that is actually large enough to offset their pay-for-performance penalties.

3. HAC penalty foreshadows a negative overall P4P outlook

While some hospitals may be able to deflect a small readmissions penalty with a VBP bonus, HAC penalties are a different story.

Based on HAC data from the proposed rule, we estimate that organizations receiving the 1% reimbursement reduction will almost certainly see a net P4P loss. Not only is the HAC penalty a sizable 1% hit to inpatient revenues, but 80% of those hospitals receiving HAC penalties are also projected to be additionally penalized under the readmissions program, which further compounds their losses.

Don't forget to sign up for our webconference

Join me on September 10 at 3 p.m. ET to get the full rundown on pay-for-performance penalty changes. You can also log in to the Customized Assessment Portal to get your facility-specific estimates.

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