Toward Accountable Payment

Are you in the penalty zone for CMS's HAC program?

Eric Fontana

Just as hospitals are getting a handle on the quality metrics and revenue implications of the value-based purchasing and readmissions programs, CMS is introducing a third pay-for-performance program in FY 2015: the Hospital-Acquired Conditions (HAC) Reduction Program.

Make no mistake—this program is entirely separate from the Present on Admission (POA) program that was introduced in 2008. However, unlike POA, this program actually carries teeth, with the worst-performing quartile of hospitals set to see a 1% reduction to their inpatient Medicare revenue.

By 2017, this could mean a worst-case 6% cut to inpatient Medicare reimbursement when all three programs are in full swing.

Three early findings

With the recent update of CMS’s Hospital Compare data set, our team has been able to examine data for the three measures that will be used to kick off the HAC program—PSI-90, CLABSI, and CAUTI—for all facilities. So far, we see:

1. Roughly 740 hospitals are set to receive a penalty, but the composition of the penalized facilities could change.

Hospitals within the highest quartile of HAC rates will receive a 1% penalty, but our analysis shows there’s a pretty tight bunching of hospitals just outside the ‘penalty zone’—meaning they’re within range of the 1% penalty with just a slight decline in quality performance. The roughly 1,334 hospitals lying within 1 standard deviation (equal to 2.2 points), should closely monitor their HAC performance to prevent dropping into the penalized pool.

The 761 hospitals likely to face penalties for patient harm

2. If you don’t receive a penalty in year 1, you’re not off the hook in future years.

Much like the value-based purchasing program, the HAC program will expand over the first few years to include additional measures. CMS will introduce two surgical site infection measures in FY 2016, and MRSA and C.Difficile in FY 2017. Poor performance on these new measures could quickly bump a hospital into the top quartile of HAC scores, particularly for those sitting just outside the penalty range.

3. Some states will be hit harder than others.

If the historical trend holds true, our early analysis indicates that hospitals in California (58 facilities) will likely see more penalties than any other state, closely followed by Texas (45), and New York (43). However, if we consider the proportion of hospitals receiving a penalty (minimum of 30 participating hospitals), Utah (50%), NJ (38%), and Oregon (36%) hospitals comprise the highest penalized states in the nation.

Get your HAC penalty estimate now

Naturally, high-level trends are only so useful.

Our new Hospital-Acquired Conditions Impact Assessment provides an early look at your organization's score, according to the most recent Hospital Compare data and the methodology described in CMS’s FY 2014 Final Inpatient Rule.


Please note the data we used from Hospital Compare is not the final data CMS will use to compute the penalties, so results will likely change a bit as we continue to update the analysis moving forward.

Get your HAC penalty estimate

Get an early look at your organization's score under CMS's Hospital-Acquired Conditions Reduction Program, according to the most recent Hospital Compare data and the methodology described in CMS’s FY 2014 Final Inpatient Rule. Check it out »

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Meet the author

Eric Fontana
Practice Manager
Data and Analytics Group