Medicare Facilities Payment Reforms

• Hospital Value Based Purchasing (VBP). Establishes budget-neutral VBP for hospitals in Medicare for discharges on or after 10/1/12 (FY 2013). Applies to 1% of base DRG payments in FY 2013 increasing to 2% in future years. (PPACA § 3001(a))
• Other VBP. Develop plans to implement VBP programs for skilled nursing facilities, home health agencies and ambulatory surgical centers (Reports to Congress due 1/1/11). (PPACA §§ 3006, 10301)
• VBP Pilots. Pilot test VBP program for psychiatric hospitals, long-term care hospitals, rehabilitation hospitals, PPS-exempt cancer hospitals and hospice programs not later than 1/1/16; if successful, HHS may expand after 1/1/18. (PPACA § 10326)
• Pay for Reporting. Starting in rate year 2014, LTC and inpatient rehabilitation, psychiatric hospitals and hospice programs that do not submit data on quality measures to CMS will have their annual update reduced by 2%. Exempt cancer hospitals must submit quality data as a condition of participation. CMS will make quality measures public. In addition, HHS will collect additional data from hospice programs to revise payment rates for certain services not earlier than 10/1/13. (PPACA §§ 3005, 3132, 10322)
• “Efficiency” Payments. HHS will make $400 million in special payments available in FYs 2011 and 2012 to hospitals in counties with age-sex-race adjusted spending per beneficiary in the lowest quartile of all counties. (HCERA § 1109)
• Hospital-Acquired Conditions Payment Adjustment. Starting in FY 2015, applies a 1% payment reduction to all discharges for hospitals in top quartile of hospitals with respect to their rates of risk-adjusted hospital-acquired conditions. (PPACA § 3008)
• Hospital Readmissions Reduction Program. Starting in FY 2013, reduction in payment for hospitals based on their levels of excess preventable readmission: up to 1% in 2013, up to 2% in 2014, up to 3% in 2015 and thereafter. (PPACA §§ 3025, 10309)
• Medicare Shared Savings Program (ACOs). Creates Accountable Care Organizations (ACO) / Shared Savings payment model within FFS Medicare to allow groups of providers working together (the ACO) that reduce costs for assigned Medicare FFS beneficiaries relative to a spending benchmark and meet quality targets to share in a portion of the Medicare savings. Allows different payment models: FFS, partial capitation, any other payment models. HHS may give preference to ACO involved with other payers. (PPACA §§ 3022, 10307)
• Voluntary Payment Bundling Pilot. Establishes a national voluntary pilot program starting 1/1/13 for 10 conditions (to be identified by HHS) to bundle payments for episodes of care (defined as 3 days prior to admission, hospital stay and 30 days post-discharge). Bundled services include inpatient and outpatient hospital services, post-acute care services, physicians, post-acute providers such as SNFs and other services. May be expanded and extended after 2016 if there are certified savings. (PPACA §§ 3023, 10308)
• Gainsharing Demonstration Extension. Extends the gainsharing demonstration until 9/30/11, and extends the relevant reporting requirements. Appropriates an additional $1.6 million in FY 2010, available through FY 2014. (PPACA § 3027)

Medicare Physician Payment Reforms

• Physician Quality Reporting Initiative. Extends incentives for reporting to 2014, but lowers them (1.5% in 2011, 1% after). In 2015, incentives end and penalties for non-reporting begin (-1.5% in 2015, -2% after). As an alternative to submitting data to CMS, physicians may submit data to a Maintenance of Certification (MOC) program run by a medical specialty body, which will submit data to CMS on behalf of its participants. Moreover, physicians submitting data to an MOC receive an additional 0.5% incentive if they complete a MOC practice assessment. (PPACA §§ 3002, 10327)
• Begins phasing in physician payment modifier based on composite of quality and efficiency measures under the physician fee schedule. (PPACA § 3007) (Actual payment starts 1/1/15 for some physicians; phases in for all physicians by 1/1/17).

Medicare Physician Feedback Program

Other New Medicare Delivery Models/Reforms

• New Center for Medicare and Medicaid Innovation (CMI) to test and evaluate different payment structures and methods to reduce spending and improve quality. HHS may expand projects in Medicare, Medicaid and CHIP that improve quality of care without increasing spending or reduce spending without reducing quality. Potential models for testing include allowing states to test all-payer payment reform and contracting directly with groups of providers and suppliers, such as through risk-based comprehensive payment or salary-based payment. Provides a direct appropriation of $10 billion in aggregate for FYs 2011-2019. (PPACA §§ 3021, 10306)
• Community-Based Care Transitions Program. HHS funds hospitals with high readmission rates or community-based organizations with arrangements with hospitals to manage transition of chronically ill “high-risk” beneficiaries from inpatient to outpatient settings. Starting 2011 for 5 years, though HHS may expand the program if HHS determines it will reduce spending without reducing quality. (PPACA § 3026)
• Minority Health. Establishes the Office of Minority Health in Office of the Secretary that will award grants/contracts to public and nonprofit private entities to assure improved health status of racial and ethnic minorities through such activities as community outreach, language services, workforce cultural competence, etc. (PPACA § 10334)
• Independence at Home Demonstration. Beginning no later than 1/1/12, HHS tests payment incentive and delivery model using primary care teams to deliver home-based care for high-need population (2 or more chronic illnesses) and coordinate health care across all settings. Must use electronic health systems, remote monitoring and mobile diagnostic technology. Spending targets determined on a per capita basis with a risk corridor. (PPACA § 3024)

Other Medicare Initiatives

• Modernizing CMS Computer and Data Systems. HHS develops plan/budget to improve providers’ access to data for care management and coordination, and support evaluations of delivery/payment system reforms. (PPACA § 10330)
• GAO Study on Beneficiary Access to Dialysis. GAO to study including oral drugs in bundled payments for treating ESRD and report to Congress within one year. (PPACA § 10336)
• GAO Study on Causes of Action. GAO to report within 2 years on whether various new delivery system reforms and quality improvement provisions would establish new causes of action (right to sue). (PPACA § 3512)

Federal Delivery Innovations

• Community-Based Collaborative Care Networks. HHS grants (through HRSA) to consortia of providers with a joint governance structure that provide comprehensive and integrated health care services for low-income populations. Grantees may help low-income individuals access services and health coverage programs, obtain a regular primary care provider, provide case and care management, perform health outreach and provide transportation. (PPACA § 10333)
• Regionalized Systems for Emergency Care. HHS awards at least 4 grants for pilot projects to state/local government partnerships or Indian tribes to test innovative models of regionalized emergency/trauma care. (PPACA § 3504)
• Trauma Care Centers and Service Availability. HHS awards grants to Indian trauma centers to defray uncompensated costs and improve services. (PPACA § 3505)