CMS Reporting Requirements – 4 Changes Hospitals Need to Know for 2014

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If hospitals want to survive the new healthcare environment, they can’t simply brace themselves for the Centers for Medicare & Medicaid Services’ (CMS) new reporting measures — they must proactively improve their quality scores. Why? Because significant changes to the existing rules will take place this summer and if health systems aren’t prepared to meet the new performance standards set by CMS, they will experience severe financial set-backs — or even go out of business.

For example, a rule proposed by CMS on April 30, 2014, seeks to update Medicare payment policies for inpatient care in fiscal year 2015 (October 2014 – September 2015). This action is a continuation of the government’s effort to improve the quality of healthcare while slowing the long-term cost growth.

Each new version of the CMS reporting measures clearly demonstrates CMS’s long-term strategy to cut reimbursements for facilities that don’t meet quality benchmarks. It’s critical that health systems not only understand the upcoming changes to CMS hospital quality-improvement programs but proactively prepare for them. Here are the four proposed CMS changes for 2014.

1. Hospital Value-Based Purchasing Program 

Established by the Affordable Care Act, the hospital value-based purchasing (VBP) program adjusts payments (in the form of penalties and bonuses) to hospitals based on the quality of care they provide. Hospitals are rewarded for best clinical practices and how well they enhance the patient experience of care.

For fiscal year 2015, the portion of Medicare payments available to fund the value-based incentive payments will increase to 1.5 percent of the base operating diagnosis-related group (DRG) payment. In other words, all hospitals will have payments decreased by 1.5 percent with the potential to earn a bonus, rewarding those hospitals that perform well. According to CMS estimates, the total amount available for value-based incentive payments in FY 2015 will be approximately $1.4 billion.

There will also be two new outcomes measures for 2015: AHRQ Patient Safety Indicators (PSI) composite and central line-associated blood steam infection (CLABSI). An efficiency measure of Medicare cost per beneficiary will similarly be added. Then the total performance score for each hospital will be calculated by using the following weights (percentages) to determine the performance for the top four domains:

  • Clinical process: 20 percent
  • Patient experience: 30 percent
  • Outcomes: 30 percent
  • Efficiency: 20 percent

2. Hospital Readmissions Reduction Program

The Hospital Readmissions Reduction Program is the government’s attempt to reduce hospital readmissions for patients who’ve recently been admitted for certain conditions or procedures.

Currently, hospitals must measure and report on readmissions for the following conditions: heart failure (HF), acute myocardial infarction (AMI), and pneumonia (PN). For FY 2015, however, CMS proposed the addition of two new conditions to their readmissions reporting meaures: chronic obstructive pulmonary disease (COPD) and total hip arthroplasty/total knee arthroplasty (THA/TKA). To better determine which THA/TKA patients underwent nonelective surgeries, CMS issued a revised definition for THA and is proposing to exclude hip fractures coded as either a principal or secondary diagnosis.

For 2015, the Hospital Readmissions Reduction Program is proposing a maximum penalty for readmissions of 3 percent. It’s currently set at 2 percent. CMS estimates from January 2012 to December 2013 already show significant improvement as a result of the program: hospital Medicare readmissions declined by a total of 150,000.

Health Catalyst’s Readmission Explorer tool displays easy-to-understand trends, comparisons, and detailed, patient-level data through an uncluttered user interface.

Health Catalyst’s Readmission Explorer tool displays easy-to-understand trends, comparisons, and detailed, patient-level data through an uncluttered user interface.

3. Hospital Inpatient Quality Reporting

The Hospital Inpatient Quality Reporting (IQR) Program, established in 2003, requires hospitals to submit quality reporting measurements for health conditions specific to the Medicare population. With the latest proposed rule, however, CMS is seeking to revise measures for this program. In specific, for 2015 and 2016, CMS proposes to align the reporting and submission timelines for clinical quality measures for the Medicare Electronic Health Record (EHR) Incentive Program with the reporting and submission timelines of the Hospital IQR Program. If hospitals don’t submit these reports, they’ll risk an increased payment reduction of 2 percent (up from 0.4 percent). The proposed changes represent CMS’s effort to align the different reporting mechanisms.

4. Hospital-Acquired Condition (HAC) Reduction Program

The Hospital-Acquired Condition (HAC) Reduction Program is the newest CMS quality program. This program penalizes hospitals for high HAC rates. CMS wants to encourage hospitals to improve their quality processes as a way to prevent patients from contracting costly, hospital-acquired conditions when they’re being treated for a primary concern. The HAC Reduction Program penalty begins in October 2014.

Under the HAC Reduction Program, hospitals with the highest rate of HACs — specifically, those in the top 25 percent — will receive a 1 percent reduction in Medicare inpatient payments. CMS estimates 753 hospitals will be subject to the one percent reduction and overall payments will decrease by $330 million or 0.3 percent.

Hospitals are not in the dark as to where they stand in terms of HAC rates. CMS has released a file with the scores for each facility. The preliminary analysis is available on the CMS web site.

CMS has categorized HAC measurements in two domains:

  • Domain 1 includes the AHRQ PSI-90 composite measure, which consists of eight component indicators:
    • PSI 3 Pressure ulcer rate
    • PSI 6 Latrogenic pneumothorax rate
    • PSI 7 Central venous catheter-related blood stream infection rate
    • PSI 8 Postoperative hip fracture rate
    • PSI 12 Postoperative pulmonary embolism (PE) or deep vein thrombosis rate (DVT)
    • PSI 13 Postoperative sepsis rate
    • PSI 14 Wound dehiscence rate
    • PSI 15 Accidental puncture and laceration rate
  • Domain 2 consists of the Center for Disease Control and Prevention’s NHSN (National Healthcare Safety Network) CAUTI and CLABSI measures. CAUTI is catheter-associated urinary tract infection and CLABSI is central-line associated blood stream infection.

For Domain 1 in FY 2015, hospitals were measured on their performance from July 1, 2011 to June 30, 2012. The time period for Domain 2 was during the calendar year of 2012 to 2013. To calculate the scores, CMS weights Domain 1 at 35 percent and Domain 2 at 65 percent.

To read about four ways to reduce your risk of receiving any HAC penalties, read this article.

Needed: A Systematic Approach to Improve Quality and Cost

Changes from the government will be ongoing — and CMS will continue to relentlessly increase their cost and penalty measures through various improvement programs. And while it may seem like a 1 percent reduction isn’t a huge hit on a hospital’s margin, when you look at the individual programs and add up the reductions, you can see there’s a tremendous financial disadvantage to not improving quality. In fact, these reductions can exceed the average margin for most hospital systems and cause significant financial hardship. The traditional method of just squeezing out cost won’t be enough for hospitals to survive; they will need a different method — a systematic and ongoing approach to improve quality and cost to keep up with these yearly mandates.

The key to successfully improving quality performance and meeting all of these measures is by using the right information and the right processes at a system level to drive improvement. An analytics system that can track performance and then measure any improvements made based on targeted quality interventions is essential. Such a reporting system, combined with getting clinical teams in place to solve quality issues, can change a hospital’s culture. In the big picture of healthcare reform, the government is using its purchasing power as a lever to change our culture of care delivery. Hospitals that don’t successfully and systematically change won’t survive.

Have you prepared for CMS’s new reporting measures? If so, what have you done? Do you have an analytics system in place to be able to measure your improvements? What are your greatest concerns about CMS’s reporting measures?

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