Advancing legislation would expand P4P initiatives to the post-acute sector.

Sept. 7—Combining two large Medicare pay-for-performance (P4P) programs is among the steps that Congress is considering to simplify the quality-compliance burden on hospitals.

Although providers and their advocates acknowledged that the five Medicare P4P programs have helped focus provider efforts to reduce adverse outcomes—such as readmissions and hospital-acquired conditions—the programs’ structures also have created “unnecessary complexity,” one advocate said at a congressional hearing this week.

The financial impact of the Medicare P4P programs is large and growing. In FY17, hospitals will pay a net $930 million, or 1.1 percent of their Medicare operating payments, as a result of the five P4P programs, according to new projections by the Greater New York Hospital Association (GNYHA). The biggest impact will be the $529 million in net hospital cuts from Medicare’s Hospital Readmissions Reductions Program (HRRP).

Hospital advocates have highlighted the time-consuming challenge presented by the programs. For example, by 2019 hospitals will be responsible for more than 90 measures in the Centers for Medicare & Medicaid Services’ (CMS’s) hospital quality reporting and P4P programs, according to the American Hospital Association (AHA).

“These regulatory challenges are real and they distract from ultimate patient care,” Rep. Pat Tiberi (R-Ohio) said at a congressional hearing this week. “It is our goal to provide relief and pay for that relief.”

Hospitals also have worried about the P4P programs’ disparate impacts on certain hospitals.

For instance, the Medicare P4P programs will cut all hospitals’ base operating payments by 1.08 percent, but the reduction rises to 1.67 percent for major teaching hospitals and to 1.18 percent for hospitals with large populations of low-income and Medicaid patients, according to GNYHA.

Coming Legislation

Some relief could come through legislation sponsored by Rep. Erik Paulsen (R-Minn.) to combine two of the P4P initiatives: the Hospital-Acquired Condition (HAC) program and HRRP (the others are Value-Based Purchasing, the Inpatient Quality Reporting, and Meaningful Use Incentive programs). The focus on those two programs is significant because 57 percent of Medicare’s P4P program penalties are levied through the HRRP and 40 percent through the HAC program.

The legislation also will focus the programs on HACs and readmissions that are avoidable “rather than just punishing hospitals for things that are essentially outside their control,” Paulsen said at the hearing. The legislation would continue the budget-neutral approach of the programs.

The legislation also will aim to make the penalties and bonuses match the financial impact of readmissions and HACs on the Medicare program.

The outsized penalties of the programs—as compared to the costs of the violations to Medicare—is one of the “major issues” that hospitals have with the programs, Elisabeth Wynn, a senior vice president for the GNYHA, said in testimony. For instance, penalties for avoidable readmissions of patients undergoing hip or knee replacements are 20 times larger than the payments Medicare would make to the hospital for the readmission.

Another goal of the bill will be to add a “clinical and credible method of risk adjustment,” Paulsen said.

Hospital groups have long urged Medicare to incorporate socioeconomic status (SES) adjustment in the HRRP as a way to ensure certain hospitals are not disproportionately penalized.

The planned legislation would follow the Establishing Beneficiary Equity in the Hospital Readmission Program Act of 2015, which would require Medicare to adjust the readmission penalty based on a hospital’s share of dual-eligible patients, i.e., low-income seniors or young people with a disability who are eligible for both Medicare and Medicaid. That legislation has passed the House but has not yet been taken up by the Senate.

AHA also urged CMS to exclude from HRRP penalties any readmissions unrelated to the initial admission.

Changes to Medicare’s HRRP are a matter of “great urgency,” Wynn said, because each year Medicare adds more conditions to HRRP, thereby increasing the cost of any legislative adjustment.

Hospitals have found little association between Medicare’s P4P programs and the overall hospital-quality star ratings.

“While we have serious concerns about some design features of the star ratings, namely that they give too much weight to the inadequately risk-adjusted patient satisfaction and readmissions measures, we are also concerned that this sends mixed messages about Medicare’s view of an individual hospital’s quality performance,” Wynn said.

PAC Bill

Members of Congress speaking at the hearing of the Ways and Means Subcommittee on Health said they planned to continue pushing the Medicare Post-Acute Care Value-Based Purchasing Act of 2015. That bill would repeal the FY18 market basket update cap for post-acute care providers (PACs) mandated by the Medicare Access and CHIP Reauthorization Act (MACRA) and replace it with a PAC value-based purchasing (VBP) program.

That legislation to expand Medicare P4P has drawn some hospital support, but among the changes sought by AHA is a broadening of the focus from merely reducing provider payment to promoting value.

“Without a more balanced, budget-neutral approach that includes an assessment of quality, the PAC VBP program appears to function as a mechanism to cut provider payments in perpetuity, rather than primarily as a way to promote value,” AHA noted in comments submitted to the subcommittee.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Wednesday, September 07, 2016