Hospital Readmission Reductions Program (HRRP)

The Centers for Medicare & Medicaid Services (CMS) implemented the program beginning in fiscal year (FY) 2013 (October 1, 2012). To calculate the payment reduction, CMS first calculates a hospital's excess readmissions. The algorithm used to calculate excess readmissions captures an individual hospital's performance compared to that of hospitals nationally over a 3-year performance period. The excess readmission measure is then risk adjusted using a methodology endorsed by the National Quality Forum (NQF) to account for differences in patient characteristics; factors currently included in the adjustment include demographic characteristics, clinical comorbidities, and patient frailty (NQF, 2014). CMS then uses the adjusted excess readmissions measure to calculate the payment adjustment. According to a Kaiser Family Foundation analysis of CMS data, in FY 2016, based on performance for the period of June 2010 through July 2013, an estimated 78 percent of hospitals will be penalized under the HRRP, and 1.2 percent of hospitals will be penalized the maximum rate of 3 percent (Boccuti and Casillas, 2015). The average hospital penalty among penalized hospitals is estimated to be –0.63 percent, totaling approximately $428 million (Boccuti and Casillas, 2015).

Hospital-Acquired Condition (HAC) Payment Reduction

The Agency for Healthcare Research and Quality (AHRQ) Patient Safety Indicator (PSI) 90 Composite includes eight potentially preventable conditions:

1.

pressure ulcer,

2.

iatrogenic pneumothorax,

3.

central venous catheter-related bloodstream infections,

4.

postoperative hip fracture,

5.

perioperative pulmonary embolism or deep vein thrombosis,

6.

postoperative sepsis,

7.

postoperative wound dehiscence, and

8.

accidental puncture or laceration (CMS, 2015d).

The Centers for Disease Control and Prevention's (CDC's) National Healthcare Safety Network (NHSN) measures include Central-Line Associated Bloodstream Infection (CLABSI), Catheter-Associated Urinary Tract Infection (CAUTI), and Surgical Site Infection (SSI) measures (CMS, 2015d). The infection measures are currently risk adjusted for certain patient demographics (age and sex) and clinical factors (comorbidities and complications) (HHS, 2014). Measures are then grouped into two domains. Domain 1 covers the PSI 90 Composite and is weighted at 25 percent toward the total HAC score for FY 2016. Domain 2 covers the three CDC NHSN CLABSI, CAUTI, and SSI measures and is weighted at 75 percent toward the total HAC score. In other words, the hospitals receive 99 percent of what they otherwise would have been paid for all discharges (CMS, 2014a). In FY 2015, more than 700 hospitals received payment reductions under the HAC reduction program (CMS, 2014a).

Hospital Value-Based Purchasing

Clinical process measures include measures related to getting appropriate treatments in a timely manner (e.g., receiving angioplasty within 90 minutes of hospital arrival for acute myocardial infarction [AMI] patients). Patient experience measures are taken from the Hospital Consumer Assessment of Healthcare Providers and Suppliers (HCAHPS) survey and cover eight dimensions of care:

1.

nurse communication,

2.

physician communication,

3.

cleanliness and quietness,

4.

responsiveness,

5.

pain management,

6.

pharmacy communication,

7.

discharge information, and

8.

an overall rating, plus a consistency score (the median score across all dimensions).

Clinical outcomes include 30-day mortality for AMI, heart failure, and pneumonia, and certain patient safety measures—AHRQ PSI 90 composite and CDC NHSN CLABSI (MLN, 2013). For each domain of performance, CMS calculates both an achievement score (compared to a threshold of performance) and an improvement score (compared to a baseline benchmark for all other hospitals, not just other similar hospitals), and uses the better of the two scores when calculating the total performance score (CMS, 2012). The four domains are weighted for the total performance score as follows: 20 percent for clinical process, 30 percent for patient experience, 30 percent for clinical outcomes, and 20 percent for efficiency. CMS uses this performance score in a mathematical formula to calculate an incentive payment for each hospital (MLN, 2013).

According to a Government Accountability Office (GAO) analysis, for FY 2015, 74 percent of hospitals had payment adjustments (bonuses or penalties) of less than 0.5 percent; only 8 percent of hospitals received bonuses of 0.5 percent or greater, and 18 percent of hospitals received penalties of 0.5 percent or greater (GAO, 2015). GAO analysis also found that payment adjustments varied significantly by hospital characteristics, with safety-net hospitals receiving smaller bonuses and larger penalties compared to hospitals overall, while small urban hospitals received larger bonuses and smaller penalties compared to hospitals overall (GAO, 2015).

Medicare Shared Savings Program (MSSP)

The MSSP has two tracks: a one-sided model and a two-sided model. In the one-sided model, health care organizations are eligible to share a portion of cost savings achieved only for the first year of the organization's agreement with Medicare. They are not accountable for losses during the performance period. Accountable care organizations (ACOs) that enter into a one-sided model must enter a two-sided agreement in subsequent agreements. In the two-sided model, health care organizations share a portion of both savings and losses achieved, and must remain in this model for subsequent agreements. ACOs that enter into a two-sided agreement are eligible for a higher sharing rate with a higher performance payment limit compared to those that enter into a one-sided agreement (CMS, n.d.-d). The benchmark is weighted toward the third year using the national growth rate such that benchmark year (BY) one is weighted at 10 percent, BY two is weighted at 30 percent, and BY three is weighted at 60 percent (CMS, 2014c).

To qualify for shared savings, organizations must meet a minimum savings threshold, the minimum savings rate (MSR). For organizations in both the one- and two-sided models, the MSR is calculated based on the percent below the benchmark adjusted for beneficiary characteristics and accounting for normal variation. For the two-sided model, the threshold above which organizations must share losses is determined using the minimum loss rate (MLR), which is calculated based on the percent above the benchmark adjusted for beneficiary characteristics and accounting for normal variation (CMS, 2014c). Among these, 99 percent (401 ACOs) entered into a one-sided agreement and 1 percent (3 ACOs) entered into a two-sided agreement. For performance year 2014, 92 MSSP ACOs held spending to $806 million below their benchmarks, resulting in $341 million in payments to the ACOs and a net savings of $465 for the Medicare Trust Funds (CMS, 2015e). No ACOs under the two-sided model owed losses (CMS, 2015e).

Physician Value-Based Modifier

Beginning in 2015, the value modifier was applied to physicians in groups of 100 or more eligible professionals (defined as physicians and select other practitioners and therapists) (CMS, n.d.-c). In 2016, it will be applied to physicians in groups of 10 or more eligible professionals, and beginning 2017, it will be applied to all physicians (CMS, n.d.-c). Although the precise value modifier calculation methodology will change slightly between 2015 and 2016, for physicians in category 1, quality is assessed using a composite score covering six domains (effective clinical care, person- and caregiver-centered experience and outcomes, community/population health, patient safety, communication and care coordination, and efficiency and cost reduction) and cost is assessed using a composite score covering two domains (per capita costs for all attributed beneficiaries and per capita costs for beneficiaries with specific conditions) (CMS, 2015b).

For 2015, category 1 physician groups could either receive a neutral value modifier (fixed at 0.0 percent; no adjustment) or elect to have their value modifier calculated using CMS's quality tiering methodology. Under quality tiering, physicians could receive an upward, neutral, or downward adjustment (CMS, n.d.-c). For 2016, all category 1 physicians have their value modifier calculated using quality tiering; groups with 10 to 99 eligible professionals can receive an upward or neutral (no) adjustment, and groups with 100 or more eligible professionals can receive an upward, neutral, or downward adjustment (CMS, 2015b). Physicians in category 2 will receive a value modifier set at a fixed negative adjustment (–1.0 percent for 2015 and –2.0 percent for 2016).

In 2015, 691 groups met the minimum Physician Quality Reporting System (PQRS) reporting requirements for category 1, and 319 failed to meet reporting requirements and were designated to category 2 (CMS, n.d.-a). Of category 1 groups, 127 groups elected to have their value modifier calculated using quality tiering. Among these, 14 groups received upward adjustments for performance, 81 received no adjustments, 11 received negative adjustments, and 21 received no adjustment owing to insufficient data to determine quality and cost performance. A total of $11.4 million was distributed from groups receiving negative adjustments to those receiving positive adjustments. The Physician Value-Based Payment Modifier Program is set to expire in 2018, but a new physician incentive program, the Merit-Based Incentive Payment System (MIPS) is set to begin in 2019 (CMS, 2015h).

End-Stage Renal Disease Quality Incentive Program

To calculate facility performance, the Medicare Improvements for Patients and Providers Act (MIPPA) requires CMS to use quality measures assessing anemia management, dialysis adequacy, and other measures specified by the Secretary of the Department of Health and Human Services (HHS) regarding iron management, bone mineral metabolism, vascular access, and patient satisfaction (CMS, 2015c). Achievement scores are calculated based on where facilities rank in relative to other facilities during the performance period (between the 15th percentile threshold and 90th percentile benchmark) (CMS, 2015c). Improvement scores are calculated relative to the facility's prior performance and the benchmark (CMS, 2015c). Since 2014, payments for adult beneficiaries are adjusted for age, dialysis onset, body surface, body mass, and specific acute and chronic patient comorbidities; adjustments for pediatric patients are adjusted only for age and dialysis method (MedPAC, 2015c). Payments are also adjusted for facility-level factors, including low volume (between the minimum of 11 cases and 25 cases), rural location, and wage index (CMS, 2015c; HHS, 2014; MedPAC, 2015c). For reporting measures, facilities are given points based on whether they meet reporting requirements (CMS, 2015c). CMS calculates a total performance score on the basis of a facility's clinical measures and reporting measures (CMS, 2015c). Clinical measures are weighted more heavily than reporting measures, although CMS determines the precise weight annually. For 2016 and 2017, clinical measures are weighted at 75 percent and reporting measures at 25 percent, and that increases in 2018 to clinical measures at 90 percent and reporting measures at 10 percent (CMS, n.d.-b). CMS then assigns payment adjustments on the basis of a facility's score.

Medicare Advantage (MA)/Part C

To determine payments to county-level MA plans, plans first submit a bid to offer coverage, which reflects administrative costs and profit. CMS then compares the bid to a benchmark (calculated using statutory formulas, including county-level rates based on traditional Medicare rates, the national fee-for-service rate, and plan quality) to determine the basic payment amount for enrollees in each county. To do so, CMS first calculates a risk measures for each enrollee, using the CMS hierarchical condition category model, which includes demographics (age and sex), clinical comorbidities, Medicaid status, disabled status, and working aged status,¹ and then multiplies it for the base rate for enrollees. For MA plans whose bid is above the benchmark, enrollees pay a premium covering the difference. For plans whose bid is below the benchmark, the plans receive the standard bid and also a rebate that is a fixed percentage of the difference between the non-standardized bid and its case-mix adjusted benchmark (50, 65, or 70 percent depending on a plan's star rating). This rebate must be shared with enrollees as either additional benefits or lower premiums. Payments to regional plans are calculated similarly, but their benchmark accounts for county-level plans. Plans that offer Part D coverage offer a separate bid for Part D payment, which is calculated the same way as for plans that offer just Part D coverage (MedPAC, 2015b).

MA plans that achieve higher-quality ratings under Medicare's Five Star Ratings Program are eligible for quality bonus payments (CMS, 2015a). Plan quality is assessed on the basis of performance on preventive services; management of chronic conditions; beneficiary experience (e.g., satisfaction); beneficiary complaints, access, and performance problems; members choosing to leave the plan; and plan management of beneficiary appeals (Medicare.gov, n.d.-b). Since 2011, CMS required plans to achieve four stars or higher to be eligible for bonus payments, but they are eliminating the threshold beginning in 2016 (CMS, 2015f). In 2016, plans with higher ratings will receive a bonus equaling 5 percent of the county-level rate (CMS, 2015a).

Medicare Part D

CMS calculates this payment by adjusting each plan's bid (which is estimated based on the expected costs of a Medicare beneficiary of average health) with their enrollees' actual health status. For this risk adjustment, CMS uses the prescription drug hierarchical condition category (RxHCC) risk-adjustment model, which takes into account patient case-mix, demographics (age and sex), disability status, low-income status, and long-term institutionalized status (MedPAC, 2015d).

Through individual reinsurance, Medicare subsidizes 80 percent of drug spending above the out-of-pocket threshold (enrollee costs, including the deductible and cost sharing, also known as the catastrophic cap; $4,850 in 2016), while the plan pays 15 percent, and the enrollee pays 5 percent (Medicare.gov, n.d.-a; MedPAC, 2014). In 2013, Medicare expenditures for reinsurance totaled nearly $20 billion (MedPAC, 2015a). Risk corridor adjustments limit plans' potential losses or gains by financing costs that are higher than expected or recouping profits deemed excessive (MedPAC, 2015a). At the end of each benefit year, CMS compares a plan's actual costs to its bid. Up to 5 percent of the bid, plans can keep all profits and must pay all losses. Between 5 and 10 percent above or below the bid, Medicare shares half of savings and losses with the plan. For 10 percent or more above or below the bid, Medicare covers 80 percent of the risk, while plans are at risk of 20 percent (MedPAC, 2014). Nearly 75 percent of plans pay a portion of their profits to Medicare each year under risk corridors; between 2010 and 2012, total annual payments ranged between $900 million and $1 billion (MedPAC, 2014).

Skilled Nursing Facility (SNF) Value-Based Purchasing

The quality domains include skin integrity and changes in skin integrity, incidence of major falls, and functional status, cognitive function, and changes in function and cognitive function. For FY 2018 forward, CMS proposed three measures, with one measure addressing each of the three domains. CMS will implement the SNF Value-Based Purchasing Program (the incentive program) beginning FY 2019. CMS proposed adopting the NQF-endorsed 30-day all-cause readmission measure as the performance measure on which FY 2019 incentive payments will be based, and CMS is soliciting comment on implementing the measure for SNF incentive payment application (CMS, 2015g).