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Tuesday, October 2nd, 2012
Two “Pay-For-Performance” Provisions of the Affordable Care Act Go Into Effect Oct. 1, 2012

Two major but less discussed programs under the Affordable Care Act took effect October 1, 2012, which are part of the government’s effort to deliver better quality health care.  Both programs aim to reward hospitals for providing more efficient and higher quality care and penalize those that don’t.

Under the Hospital Value-Based Purchasing Program, Medicare will pay hospitals according to how well they perform on a set of clinical quality measures and on patient satisfaction surveys.  Medicare will do this by withholding 1 percent of its regular hospital payments over the next year – totaling an estimated $850 million – and redistributing that pot of money to the best-performing hospitals (source). 

Additionally, Medicare is applying a penalty to about two-thirds of the hospitals serving Medicare patients with higher than expected readmission rates.  These penalties are estimated to average around $125,000 per hospital this coming year.  Data to assess the penalties has been collected and analyzed, and Medicare has shared the results with individual hospitals.  Medicare plans to post details online later in October, and people can look up how their hospitals performed by using CMS’s “Hospital Compare” website (source).

Brett Norman, of Politico, wrote today about the two programs:

They are the largest efforts to date to nudge hospital payments away from paying for quantity toward so-called pay for performance.

‘I think we all see these programs as the first steps towards the way the system will be structured in the future and the way incentives will be structured in the future,” said Mindy Steinberg, director of government relations for the Association of Academic Health Centers. “But everyone needs to recognize that this is the first step in a long, complicated process.’

Questions are already being raised about whether the rewards and penalties are big enough to spur hospitals to action. And the poorly understood contribution of socioeconomic factors to health care overall, and re-admissions in particular, raises worries that the readmissions program may unfairly penalize hospitals operating in the most challenging environments.

The value-based purchasing and readmissions programs represent a new step for Medicare, which has until now limited its pay-for-performance efforts to hospitals that voluntarily participate in pilot experiments such as the ACO pilot programs and bundled payment initiatives.  The new programs are mandatory for most acute care hospitals, with roughly 3,000 hospitals automatically enrolled.

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