Medicare’s Value-Based Purchasing (VBP) program steps on the accelerator, beginning Oct. 1, 2014, when it adds an efficiency score—a hospital’s spending per Medicare patient—to the formula that determines hospital pay. This marks the first time that the Centers for Medicare & Medicaid Services (CMS) has included a straight financial measure in its VBP calculation. It is also the first instance in which hospitals are directly accountable for non-acute care costs accrued by non-affiliated physicians and post-acute providers.
“We have come to a point where the folks who pay for health care are no longer looking at the hospital silo or the physician silo,” says Chad Mulvany, HFMA technical director. “They are looking at the total bottom-line dollar number.”
The new efficiency score may be inducing heartburn in many healthcare leaders, but not for Susan Dragoo, director of quality and innovation at INTEGRIS Health. “In a way, this is a measure of how well we are coordinating care, which is something that we are working very hard to improve,” she says.
Melinda Hancock, CFO at Bon Secours Virginia Health System, shares Dragoo’s enthusiasm because the efficiency score reinforces her health system’s focus on cost reduction. “We were accepted into the Medicare Shared Savings Program as of January 1, so the timing couldn’t be better,” she says. “We are trying to reduce our spend so this is beautifully aligned.”
The efficiency score introduces a new acronym—MSPB—for Medicare spending per beneficiary. The measure covers a hospital’s spending-per-Medicare-patient for eligible patient care episodes, starting three days before an inpatient hospital admission and ending 30 days after discharge.
Each hospital’s baseline MSPB, which reflects its performance for the period from May 1, 2011 to Dec. 31, 2011, is currently posted on Medicare’s Hospital Compare website. The score is determined by dividing the hospital’s MSBP by the median amount per Medicare beneficiary that CMS spends nationally.
The efficiency score will be worth 20 percent of a hospital’s VBP score for the federal FY15, which begins Oct. 1, 2014 (see the exhibit below).
A hospital’s federal FY15 efficiency score will be determined by one of two calculations: Its MSPB score for the performance period of May 1, 2013, to Dec. 31, 2013, or its improvement since the baseline time period in 2011.
Hospital MSPB scores are not always predictable, say Dragoo and Hancock. For example, INTEGRIS Baptist Medical Center, a tertiary care center, had an admirable 0.99 efficiency score for the 2011 performance period, despite treating the highest acuity patients in the INTEGRIS system. “By the same token, one of our hospitals that I know to be fairly efficient was also at either 0.99 or 1.0,” Dragoo says. “I would have expected them to have a better score, so we just have to dig into those numbers and understand what’s driving that, which is a new conversation.”
“You can either improve substantially over your baseline, or you can look really good compared to every other hospital in the country—and those are the only two ways you score points in value-based purchasing,” Hancock says. “So we needed to first identify which Bon Secours hospitals were already looking good in their baselines and which ones weren’t to determine where we had work to do.”
Pinpointing cost containment opportunities. That was the starting point for the Bon Secours Health System, based in Marriottsville, Md. The system includes 14 acute-care hospitals along with nursing care and other facilities. “When we first saw the efficiency component show up on the Hospital Compare website, we quickly pulled all of our hospital scores and presented them to our CMOs, CNEs, CFOs, and CEOs from across the system,” says Hancock, the finance lead for Bon Secours’ systemwide clinical transformation efforts.
While that single number—say 1.01 for a hospital that is about average—seems simple, it is backed by a lot of data points. The MSPB reports available on CMS’s QualityNet.org reveal each hospital’s spending for three phases of each episode—the three days before admission, the inpatient stay, and the 30-day period after discharge—and it compares those spending levels to state and national averages.
In addition, the report breaks down spending in each phase by claim type—outpatient, skilled nursing, durable medical equipment, and others—to allow for comparison with state and national averages.
The report also identifies a hospital’s average spending per episode by major diagnostic category and compares that amount to state and national averages (see the exhibit below). Thus, leaders can see, for example, if a hospital has relatively high costs for nervous system issues or low costs for mental disorders.
Those details make it easier to see where a hospital needs to reduce costs, INTEGRIS’ Dragoo says. “Because it breaks spending down into the three phases, and it also breaks spending down by major diagnostic category, I definitely think that it gives you a place to start,” she says. “You can see how CMS derived the numbers. So if people take the time to review these reports, then the reports will be helpful.”
Pairing up finance and clinicians. At Bon Secours, Hancock tasked a team of finance leaders to analyze the hospital-specific MSPB reports for their respective markets to identify the best opportunities for improvement. Rather than trying to address all of the major diagnostic categories simultaneously, each hospital will focus on two categories to start with.
The finance leaders are meeting with CMOs and chief nurse executives at each hospital to ask why, for example, the nervous system diagnostic category is higher than the national average and what might be done to lower the cost for patients in that category.
“As you can imagine, the answer is different at every single hospital, for every single major diagnostic category. There is not a one-size-fits-all answer,” Hancock says. “This is really forcing that conversation between the clinical and financial leaders saying, ‘Here’s the data—what do we do about it?’”
When Hancock distributed the reports to hospital leaders, they were surprised to see that they were accountable for costs beyond the inpatient stay. What could they do about the costs of care provided by physicians or nursing homes that have no ties to the Bon Secours system?
“And I said: ‘That’s what Medicare is asking: What can you do about it?’” Hancock says. “Is it not in your best interest to discharge that patient in a manner that optimizes the care and reduces the spend?”
Swedish Health Services, in Seattle, has not yet focused much attention on the MSPB scores at the health system’s five hospitals. “But we have already begun our efficiency process improvement work, which will then roll up into CMS’s efficiency score,” says Mary Gregg, MD, vice president of quality and patient safety.
Bringing together teams. Indeed, the health system’s flagship hospital, Swedish Medical Center/First Hill, had a baseline MSPB of 0.93, showing it to be considerably less costly than the national average. In addition, for three consecutive years, Swedish/First Hill has been recognized as a Leapfrog Group top hospital because of its success in preventing medical errors, reducing mortality for high-risk procedures, and reducing hospital readmissions.
Cardiac patients are generally treated at a smaller facility in the health system—Swedish Medical Center/Cherry Hill—which has a 0.99 efficiency score. Its cardiac-related core measure scores are all extremely high, and it has one of the lowest door-to-balloon times in the country. Swedish/Cherry Hill’s baseline door-to-balloon time was 127 minutes; today it is about 50 minutes.
“The only way we have done that is by having an entire multidisciplinary team come to the table and identify how to get patients from the door to the intervention quickly,” says Gregg, a heart surgeon. The lessons learned at the Cherry Hill campus were shared with the two other Swedish facilities that treat heart patients, so that all three use the same care processes.
Leading with quality. Although many quality improvements translate into reduced costs, Swedish emphasizes patient safety and quality as institutional values in their own right. “When an institution says, ‘We’re all about finance,’ I think it is really hard to get clinicians and other staff to buy into the mission,” says Todd Strumwasser, MD, the system’s chief operations officer. “It’s important to constantly lead with quality and safety because that resonates with staff and with the medical staff. You are going to get a lot more traction on every initiative that way.”
Meanwhile, Swedish/First Hill pioneered the health system’s work to improve sepsis care, reducing its mortality rate from severe sepsis and septic shock to 18 percent, compared to a national rate of at least 50 percent. Its processes were then shared with other Swedish campuses.
More recently, Swedish/Cherry Hill implemented nurse-initiated telephone calls to newly discharged heart failure patients in an attempt to reduce readmissions. The national 30-day readmission rate for Medicare heart failure patients is 24.7 percent, just slightly higher than the hospital’s starting point.
“We took our 30-day readmission rate from about 23 percent down to 16 percent just by making these phone calls at 48 hours, talking to these patients about the importance of taking their medications, and guaranteeing that they would have some kind of follow up with a practitioner within a week of discharge,” Gregg says.
The transition-of-care process that connects acute care with outpatient providers is currently being tested in pilots at Swedish’s other campuses. “We are pretty confident that this will work in a group of real complicated patients who need more chronic management, but we now have to figure out how this could work with other populations,” Gregg says.
At INTEGRIS, a 15-hospital system in Oklahoma, Dragoo thinks the MSPB will support the health system’s use of value stream management, a continuous process improvement strategy that covers the continuum of care for a specific patient population.
“That approach is very consistent with the need to have more integration of care and better coordination of care, and the new CMS efficiency measure can help us understand our performance in that regard,” she says.
Value stream management for stroke care starts with building awareness in the community about the signs and symptoms of stroke and the importance of getting stroke patients treated as quickly as possible. “Then, of course, it goes through the physician’s office, the emergency department, the inpatient stay, rehab, and post-hospital care—looking at the entire episode of care and ways to create the ideal value for the patient,” she says.
The stroke performance improvement team at a given hospital gathers around the “mother” value stream map on a regular basis to review performance on key metrics, including core measures related to stroke care, mortality, and cost. In addition, each patient care area that has some responsibility for stroke patients has a “data wall” that shows progress on quality measures.
The team regularly “walks the value stream” to review stroke care performance in the emergency department, rehabilitation, and other areas, always looking for opportunities to further reduce waste. When opportunities are found, rapid improvement events are executed, and measurement begins again.
INTEGRIS’ use of value stream management for stroke care has reduced the cost by $300 per inpatient admission. When healthcare costs are going up, and we are bringing that number down, I think that’s pretty exciting,” Dragoo says.
Like all measures in the government’s VBP initiative, CMS’s way of measuring efficiency is likely to evolve over time. The American Hospital Association (AHA) recently offered comments on a proposed efficiency measure specifically for a heart attack episode of care. Nancy Foster, AHA’s vice president for quality and patient safety policy, says many hospital executives would prefer to have cost accountability for particular diseases or conditions, rather than an entire diagnostic group or all Medicare patients.
“Hospitals oftentimes manage or change processes by first understanding where they stand relative to others in caring for, say, hip replacement patients or back surgery patients or some other condition-specific population,” she says. “So we look forward to working with CMS as they build out a cadre of measures that look at efficiency in many different ways.”
Meanwhile, Chad Mulvany, HFMA technical director, believes CMS’s approach to measuring efficiency will be flawed until all caregivers across the continuum share accountability. “Until you align the incentives for physicians and also for post-acute care providers to focus on the cost efficiency of care delivery, then I don’t think it’s an appropriate measure,” he says.
That said, the MSBP measure may help focus the attention of physicians who will soon have their own motivation to be cost conscious. The Physician Value-Based Modifier, which includes an efficiency score, will go into effect for large physician groups in 2015 and expand to all physicians two years later. “I think the hospital efficiency score is a real opportunity for hospitals to work with the physicians in the community,” Mulvany says. “I certainly would try to use that as a springboard to start the conversation.”
Of course, hospital costs account for the largest portion of the MSPB score. So the best place to start improvement efforts is at home.
“I’m a broken record on this subject, but if a hospital has not begun to use Lean, then they need to do that to understand how to eliminate waste and create ideal patient care,” INTEGRIS’ Dragoo says. “You cannot just focus on cost cutting from an old-school perspective. You must really understand what’s driving costs and how better care can result in lower costs.”
Lola Butcher is a freelance writer and editor based in Missouri. Interviewed for this article (in order of appearance): Chad Mulvany is technical director, HFMA. Susan Dragoo is director of quality and innovation, INTEGRIS Health, Oklahoma City, Okla. Melinda Hancock is CFO, Bon Secours Virginia Health System, Richmond, Va., and a member of HFMA’s Virginia, Washington D.C. Chapter. Mary Gregg, MD, MHA, is vice president of quality and patient safety, Swedish Health Services, Seattle. Todd Strumwasser, MD, is senior vice president and COO, Swedish Seattle campuses, Seattle. Nancy Foster is vice president, quality and patient safety policy, American Hospital Association, Chicago.
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