May/June 2008

Catholic Health Initiatives Prepares for Pay for Performance

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(From left) Sunil Saraf, MD, and Janet White in the emergency department at Saint Joseph Martin, Martin, Ky.; Michelle Wright scans Mary Colgan’s bar-code identification bracelet at Mercy Regional Medical Center, Durango, Colo.

As hospitals prepare for upcoming changes to the Center for Medicare and Medicaid Services’ (CMS) Value-Based Purchasing program, Catholic Health Initiatives is providing an array of resources. Value-Based Purchasing, commonly known as Pay for Performance or P4P, will change the way health care providers are reimbursed for patient care. The CMS program has two main components set to begin on October 1, 2008:
  1. CMS will stop providing additional payments for eight hospital-acquired conditions: for example, urinary tract infections that result from catheter use in the hospital. CMS has proposed adding nine more conditions to this list.
  2. CMS has proposed to reduce diagnosis-related group (DRG) base-rate payments for all hospitals by as much as five percent, but will provide the opportunity for hospitals to earn the payments back. This proposal has not yet been approved by Congress. Payments may be earned back, in part or in full, based on a hospital’s performance on clinical core measures and HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems). Core measures are evidence-based practices, such as providing patients with heart attack diagnoses with aspirin and beta blockers upon admission and discharge. HCAHPS measures patients’ experience of the care received.
Phases of P4P The formula for earning back the payment reductions will change over time as CMS phases in the complete P4P program:
  • As of October 1, 2008, reductions may be earned back based on hospital reporting of measures of performance. Currently, there are 30 measures of performance, including 22 core measures and eight HCAHPS results.
  • As of October 1, 2009, reductions may be earned back based 50 percent on hospital reporting of core measures and HCAHPS performance, and 50 percent on the performance itself.
  • As of October 1, 2010, hospitals may earn back their payment reductions based entirely on their performance.
“CMS already requires hospitals to report clinical core measures and HCAHPS results to qualify for the annual payment update, so virtually all hospitals already report,” said Kathy Sanford, RN, chief nursing officer for Catholic Health Initiatives. “However, reporting alone hasn’t been enough to increase hospitals’ quality performance as much as CMS would like. So, the focus is moving to pay for performance.” The P4P program applies only to PPS hospitals (hospitals reimbursed under the DRG system) for now, but CMS intends to expand the program to other types of health care facilities. In addition, many private insurers have indicated that they will adopt similar programs. While critical access hospitals are currently exempt from the P4P program, other payers that implement this type of program are already requiring their participation. Payment Reduction Estimates To help Catholic Health Initiatives’ hospitals determine how they might fare if P4P were fully implemented today, the national clinical services staff developed a scoring tool. “The tool provides a rough estimate of how much of the five percent payment reduction a hospital would earn back at its current level of performance,” said Jeanie Mamula, director of clinical quality improvement for Catholic Health Initiatives. “Catholic Health Initiatives’ executives expect all market-based organizations to bring their performance to a level where no money would be lost due to the P4P process.” Current estimates show that some of Catholic Health Initiatives’ hospitals would earn back most or all of the five percent payment reduction. Joe Messmer, president and chief executive officer of Mercy Medical Center, Nampa, Idaho, sees a strong link between good P4P results and a culture of excellence. “We have focused on quality initiatives not from the perspective of meeting expectations for P4P, but from the perspective of developing a culture that fits with our core value of excellence,” he said. “Right now, a byproduct of this focus would be a very good outcome for us regarding P4P. However, we realize that quality is an initiative that does not have a start and finish date. We know that we truly have to create a culture of excellence to consistently do well under programs such as P4P.” Other Catholic Health Initiatives hospitals stand to lose tens or hundreds of thousands of dollars in payment reductions. “The good news is that we’ve already done a lot of work in the area of clinical quality and patient satisfaction improvement,” said Milt Hammerly, MD, vice president of medical operations and integrative medicine for Catholic Health Initiatives. “We have tools and resources that hospitals can use to improve their core measures and HCAHPS performance.” To access these tools and resources, visit Inside CHI; click About CHI; under Strategic Initiatives, click Pay for Performance. “We will update this area of Inside CHI regularly so that the very latest tools and resources will be available,” said Hammerly. The Quality/Financial Connection P4P makes a strong connection between quality of care and financial performance. “Providing the best care possible is something we strive to do every day, and this would be a top priority for us even if CMS did not implement a Pay for Performance program,” said Joe Wilczek, president and chief executive officer of Franciscan Health System, Tacoma, Wash. “Time will tell whether this new CMS initiative will drive quality-of-care improvements. Reimbursement will be linked more than ever before to quality measures, and financial incentives are powerful motivators.” Mamula cautions that hospitals won’t achieve a level of performance at which they can stop improving. “P4P will evaluate hospital performance annually and on a curve,” she said. “Those in the 90th percentile will earn back all of their withheld CMS payments, but the bar will keep rising. It really doesn’t matter where your hospital is located, how large or small it is or how many providers are in the market. CMS has provided all hospitals with a compelling reason to make sure they provide top-quality care.”

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David Skurdal, MD, at Mercy Medical Center, Williston, N.D.