CMS Dollars Part IV: VBP Made Simple – Slot Machines and High Roller Tables

Do you enjoy a good game of poker or blackjack? Does anteing up money, taking a calculated risk, and hoping for financial reward get you excited? I bet you never imagined that your hospitals and doctors would have to participate in similar games! In the hospital Value-Based Purchasing (VBP) program for 2017, participating hospitals will be placing 2% of their base operating MS-DRG payments up for grabs, working hard to improve their performance scores, and competing against other hospitals in hopes of recuperating their dollars and winning an additional 2% bet for their hospital. 
The hospital VBP program was created by the Affordable Care Act (ACA) to encourage payment for quality rather than quantity of care. In this program, hospitals need to reduce adverse events, adopt evidence-based standards that improve outcomes, change hospital processes that enhance patient care experience, and improve efficiency of care by reducing Medicare spending per beneficiary. Hospitals that come out on top could feel like winners at their green felt-lined table of choice. 

No Small Chunk of Change

The money on the table for the hospital VBP program is no small stack of chips. CMS calculates that for 2017 there are 2957 hospitals included in the program with $1.8B available for incentive payments. For a hospital receiving $100M in CMS payments, there is an opportunity to recoup their 2% ($2M) withholding and potentially to earn an additional 2%.

Some hospitals are not allowed to participate in VBP as the program excludes hospitals not participating in the inpatient prospective payment system, subject to payment reductions in hospital IQR program,  hospitals cited for deficiencies during the performance period that pose risk to the health and safety of patients, with less than minimum number of domains calculated, with approved disaster exception specific to VBP, or that are acute care facilities in Maryland.

VBP Domains & Measures

To perform well in the program, hospitals must improve the quality of care while controlling its cost. CMS assesses hospital performance based on 14 measures divided into 4 domains. Each domain is associated with a specific weight in the final hospital performance score.

  1. Safety (25% weight): CAUTI, CLABSI, CDI, MRSA, SSI, AHRQ PSI-90 composite
  2. Clinical Care (30% weight):
    1. Outcomes (25% weight): 30-day mortality rates for AMI, heart failure, pneumonia
    2. Processes (5% weight): Flu vaccination, elective delivery prior to 39 weeks gestation, fibrinolytics within 30 minutes of arrival for AMI
  3. Efficiency & Cost Reduction (25% weight): Medicare spending per beneficiary
  4. Experience of Care/Care Coordination (25% weight):  HCAHPS Survey

For each domain, there is a baseline and a performance period of measurement, as hospitals are not only assessed for their current performance, but also for improvement of their performance over time. The measurement period varies based on domain, with some domains measured for one year while others are measured for 20 months. For all domains, the performance period is followed by a brief period of review and correction, and the payment adjustment is applied to the following fiscal year. 

For example: for 2017, VBP measures baseline periods occurred 2010-2013, performance periods occurred 2013-2015, data review occurred in 2016, and the payment adjustment will be applied to this coming fiscal year.

Tipping the Odds in Your Favor

To tip the odds in your favor and improve your total performance score, we must first understand how the game here is scored. A hospital’s total performance score is the sum of its weighted domain scores. 

In each domain, individual measures are given two scores: an achievement score and an improvement score. CMS compares the two and awards the highest score for each measure. It should be noted that a hospital can earn more points for achievement (up to 10) than improvement (up to 9), as CMS apparently believes that a hospital should not get maximum points just for improving!

Achievement scores are calculated using a “threshold” and a “benchmark.” CMS uses data from a prior baseline period to define a high level of performance which is known as the benchmark and the minimum level of hospital performance known as the achievement threshold. The achievement threshold is set at the 50th percentile of all hospitals’ performance during the baseline period. Benchmark and achievement thresholds vary by measure and year to year with 2017 values available here

VBP Payment Adjustments for 2017

CMS states that for 2017, half of participating hospitals will see a small change in payment adjustments between -0.5% and +0.5%. Many hospitals will have played a good game with 1,600 hospitals seeing a positive payment adjustment. Looking at the range of payment adjustments, CMS reports the highest performing hospitals could see slightly more than 4% payment increase while lowest performers will incur a 1.83% in penalty payments.

The Bottom Line

For most of us in healthcare, wading through hundreds of pages of these rules, calculations, and criteria can be daunting.  But the bottom line is that CMS has implemented Value-Based Purchasing to improve the quality and efficiency of care.  The challenging part is that hospitals are not playing the house in a table game with calculated odds.  They are working extremely hard to achieve better scores than the other players at the table to recoup their dollars, and in some cases, earn another 2% worth of chips (and an upgrade from the slot machines to the high rollers’ table).