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MedPAC Comments on Hospital Value Based Purchasing Rule

By March 21, 2011Commentary

There are a number of initiatives under way to test pay-for-performance programs for providers.  CMS has taken the lead on developing these programs for the Medicare program.  Earlier this year the agency released a proposed rule for the hospital value-based purchasing effort.  The Medicare Payment Advisory Commission has released a letter giving its view of the proposed rule.  (MedPAC Letter) In general the Commission was satisfied with the proposed rule.  MedPAC had previously enunciated four principles for these programs:  reward both improvement and achievement of benchmarks; fund the program by setting aside a relatively small percent of hospital payments; returning all that money to hospitals, not using it for savings;  and the performance measures should be well-accepted and evidence-based, not burdensome, not providing incentives to avoid complex patients and within control of the hospital.

The comments MedPAC addressed to CMS included limiting the number of measures to reduce administrative burdens and to focus on outcomes measures, not process measures, which often have a weak link to better outcomes.  MedPAC also expressed concern about ensuring there was adequate data to ensure statistical reliability, which may require a longer measuring period, particularly for small hospitals.  The Commission discouraged inclusion of data about hospital-acquired conditions, since there is already a separate program for that issue.  In regard to efficiency measures, it advised CMS to focus on spending per episode, not per admission, to encourage hospitals to avoid unnecessary admissions.  MedPAC also felt that many of the measures have little spread in performance, which makes it statistically difficult to measure differences between hospitals or for there to be room for improvement, so that CMS will need to be attuned to avoiding these “topped-out” measures.  The comment letter, along with the proposed rules, give a good sense of the complexity of designing and implementing a value-based purchasing program.


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