Thomas B. Valuck, MD, JDMedical Officer & Senior Adviser

Center for Medicare Management

Centers for Medicare & Medicaid Services

CMS’ Progress Toward Implementing

Value-Based Purchasing

Presentation Overview

CMS’ Value-Based Purchasing (VBP) Principles

CMS’ VBP Demonstrations and Pilots

CMS’ VBP Programs

Horizon Scanning and Opportunities for Participation

CMS’ Quality Improvement Roadmap

Vision: The right care for every person every time Make care:

Safe Effective Efficient Patient-centered Timely Equitable

CMS’ Quality Improvement Roadmap

Strategies Work through partnerships Measure quality and report comparative results Value-Based Purchasing: improve quality and

avoid unnecessary costs Encourage adoption of effective health

information technology Promote innovation and the evidence base for

effective use of technology

What Does VBP Mean to CMS?

Transforming Medicare from a passive payer to an active purchaser of higher quality, more efficient health care

Tools and initiatives for promoting better quality, while avoiding unnecessary costs

Tools: measurement, payment incentives, public reporting, conditions of participation, coverage policy, QIO program

Initiatives: pay for reporting, pay for performance, gainsharing, competitive bidding, bundled payment, coverage decisions, direct provider support

Why VBP?

Improve Quality Quality improvement opportunity

Wennberg’s Dartmouth Atlas on variation in care McGlynn’s NEJM findings on lack of evidence-based

care IOM’s Crossing the Quality Chasm findings

Avoid Unnecessary Costs Medicare’s various fee-for-service fee schedules

and prospective payment systems are based on resource consumption and quantity of care, NOT quality or unnecessary costs avoided Payment systems’ incentives are not aligned

Practice Variation

Practice Variation

Why VBP?

Medicare Solvency and Beneficiary Impact Expenditures up from $219 billion in 2000 to a

projected $486 billion in 2009 Part A Trust Fund

Excess of expenditures over tax income in 2007 Projected to be depleted by 2019

Part B Trust Fund Expenditures increasing 11% per year over the last 6

years Medicare premiums, deductibles, and cost-sharing

are projected to consume 28% of the average beneficiaries’ Social Security check in 2010

Workers per Medicare BeneficiarySelected Years

0

50

100

150

200

1966 2008 2028

in m

illi

on

s

CoveredWorkers

Part Aenrollment

Source: OACT CMS and SSA

Worker to Beneficiary Ratio

4.46 3.39 2.49

0%

3%

6%

9%

12%

1966 1976 1986 1996 2006 2016 2026 2036 2046 2056 2066 2076

Calendar year

Historical Estimated

Payroll taxesTax on benefits

Premiums

General revenue transfers

Total expenditures

HI deficit

State transfers

Under Current Law, Medicare Will Place AnUnprecedented Strain on the Federal Budget

Source: 2008 Trustees Report

Per

cen

tag

e o

f G

DP

Support for VBP

President’s Budget FYs 2006-09

Congressional Interest in P4P and Other Value-Based Purchasing Tools BIPA, MMA, DRA, TRCHA, MMSEA, MIPPA

MedPAC Reports to Congress P4P recommendations related to quality, efficiency, health

information technology, and payment reform IOM Reports

P4P recommendations in To Err Is Human and Crossing the Quality Chasm

Report, Rewarding Provider Performance: Aligning Incentives in Medicare

Private Sector Private health plans Employer coalitions

VBP Demonstrations and Pilots

Premier Hospital Quality Incentive Demonstration

Physician Group Practice Demonstration Medicare Care Management Performance

Demonstration Nursing Home Value-Based Purchasing

Demonstration Home Health Pay for Performance

Demonstration

VBP Demonstrations and Pilots

Medicare Health Support Pilots Care Management for High-Cost Beneficiaries

Demonstration Medicare Healthcare Quality Demonstration Gainsharing Demonstrations Accountable Care Episode (ACE) Demonstration Better Quality Information (BQI) Pilots Electronic Health Records (EHR) Demonstration Medical Home Demonstration

Premier Hospital Quality Incentive Demonstration

VBP Programs

Hospital Quality Initiative: Inpatient & Outpatient Pay for Reporting

Hospital VBP Plan & Report to Congress Hospital-Acquired Conditions & Present on

Admission Indicator Reporting Physician Quality Reporting Initiative Physician Resource Use Reporting Home Health Care Pay for Reporting ESRD Pay for Performance Medicaid

VBP Programs

Hospital Value-Based Purchasing

Hospital Quality Initiative

MMA Section 501(b) Payment differential of 0.4% for reporting (hospital

pay for reporting) FYs 2005-07 Starter set of 10 measures High participation rate (>98%) for small incentive Public reporting through CMS’ Hospital Compare

website

Hospital Quality Initiative

DRA Section 5001(a) Payment differential of 2% for reporting (hospital P4R) FYs 2007- “subsequent years” Expanded measure set, based on IOM’s December 2005

Performance Measures Report Expanded measures publicly reported through CMS’

Hospital Compare website

DRA Section 5001(b) Report for hospital VBP beginning with FY 2009

Report must consider: quality and cost measure development and refinement, data infrastructure, payment methodology, and public reporting

Hospital VBP Workgroup Tasks & Timeline

Environmental Scan Issues Paper Listening Session #1 for

Stakeholder Input on Issues Paper Options Paper Listening Session #2 for Input on

Hospital VBP Options Paper Final Design Final Report, Including Design,

Process, and Environmental Scan Report Submitted to Congress

2006Oct

Dec

2007Jan 17

Apr 12

May

June

Nov 21

Performance Model Overview

Hospitals submit data for all VBP measures that apply

CMS determines each hospital’s performance score on each measure: higher of 0 - 10 points on attainment or improvement

For each hospital, CMS aggregates scores across all measures within a domain (e.g., clinical process-of-care measures, HCAHPS)

CMS weights and combines each hospital’s domain scores to determine the hospital’s Total Performance Score

CMS translates each hospital’s Total Performance Score into an incentive payment using an exchange function

Earning Clinical Process of Care Points: Example

Measure: PN Pneumococcal Vaccination

Attainment Threshold.47

Benchmark.87

Attainment Range

performance

Hospital I

baseline•.21.70•

Attainment Range1 2 3 4 5 6 7 8 9

Hospital I Earns: 6 points for attainment 7 points for improvement

Hospital I Score: maximum of attainment or improvement= 7 points on this measure

Improvement Range1 2 3 4 5 6 7 8 9• • • • • • • • •

• • • • • •• • •

Score

Score

Calculation of Total Performance Score

Each domain of measures is initially scored separately, weighting each measure within that domain equally

All domain scores are then combined, with the potential for different weighting by domain

Possible weighting to combine clinical process measures and HCAHPS: 70% clinical process + 30% HCAHPS

As new domains are added (e.g., outcomes), weights will be adjusted

Translating Performance Score into Incentive Payment: Example

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percent Of VBP

Incentive Payment Earned

Hospital Performance Score: % Of Points Earned Full Incentive

Earned

Hospital A

VBP Plan Testing & Completion

Objectives: Use most current RHQDAPU and Medicare

hospital payment data to test VBP Performance Assessment Model

Complete methodology development Small N Topped-out measures Exchange function equation

Examine financial impacts of VBP Incentive

Hospital VBP Report to Congress

The Hospital Value-Based Purchasing Report Congress can be downloaded from the CMS website at: http://www.cms.hhs.gov/center/hospital.asp

VBP Initiatives

Hospital-Acquired Conditions and Present on Admission

Indicator Reporting

The HAC Problem

The IOM estimated in 1999 that as many as 98,000 Americans die each year as a result of medical errors

Total national costs of these errors estimated at $17-29 billionIOM: To Err is Human: Building a Safer Health System, November 1999. Available at: http://www.iom.edu/Object.File/Master/4/117/ToErr-8pager.pdf.

The HAC Problem

In 2000, CDC estimated that hospital-acquired infections add nearly $5 billion to U.S. health care costs annually

Centers for Disease Control and Prevention: Press Release, March 2000. Available at: http://www.cdc.gov/od/oc/media/pressrel/r2k0306b.htm.

A 2007 study found that, in 2002, 1.7 million hospital-acquired infections were associated with 99,000 deathsKlevens et al. Estimating Health Care-Associated Infections and Deaths in U.S. Hospitals, 2002. Public Health Reports. March-April 2007. Volume 122.

The HAC Problem

A 2007 Leapfrog Group survey of 1,256 hospitals found that 87% of those hospitals do not consistently follow recommendations to prevent many of the most common hospital-acquired infections2007 Leapfrog Group Hospital Survey. The Leapfrog Group 2007.

Available at: http://www.leapfroggroup.org/media/file/Leapfrog_hospital_acquired_

infections_release.pdf

Statutory Authority: DRA Section 5001(c)

Beginning October 1, 2007, IPPS hospitals were required to submit data on their claims for payment indicating whether diagnoses were present on admission (POA)

Beginning October 1, 2008, CMS cannot assign a case to a higher DRG based on the occurrence of one of the selected conditions, if that condition was acquired during the hospitalization

Statutory Selection Criteria

CMS must select conditions that are:1. High cost, high volume, or both

2. Assigned to a higher paying DRG when present as a secondary diagnosis

3. Reasonably preventable through the application of evidence-based guidelines

HAC Selection Process

The CMS and Centers for Disease Control and Prevention (CDC) internal Workgroup selected the HACs

Informal comments from stakeholders CMS/CDC sponsored Listening Session

December 17, 2007

Ad hoc meetings with stakeholders

Inpatient Prospective Payment System (IPPS) rulemaking Proposed and Final rules for Fiscal Years (FY) 2007, 2008,

2009

Selected HACs for Implementation

1. Foreign object retained after surgery2. Air embolism3. Blood incompatibility4. Pressure ulcers

Stages III & IV

5. Falls Fracture Dislocation Intracranial injury Crushing injury Burn Electric shock

Selected HACs for Implementation

6. Manifestations of poor glycemic control Hypoglycemic coma Diabetic ketoacidosis Nonkeototic hyperosmolar coma Secondary diabetes with ketoacidosis Secondary diabetes with hyperosmolarity

7. Catheter-associated urinary tract infection

8. Vascular catheter-associated infection

9. Deep vein thrombosis (DVT)/pulmonary embolism (PE) Total knee replacement Hip replacement

Selected HACs for Implementation

10. Surgical site infection Mediastinitis after coronary artery bypass graft (CABG) Certain orthopedic procedures

Spine Neck Shoulder Elbow

Bariatric surgery for obesity Laprascopic gastric bypass Gastroenterostomy Laparoscopic gastric restrictive surgery

Infectious Agents

Directly addressed by selecting infections as HACs Example: MRSA

Coding To be selected as an HAC, the conditions must be a

CC or MCC

Considerations Community-acquired v. hospital-acquired Colonization v. infection

Relationship Between CMS' HACs and NQF’s “Never Events”

1. Foreign object retained after surgery

2. Air embolism

3. Blood incompatibility

4. Pressure ulcers

5. Falls

6. Burns

7. Electric Shock

8. Hypoglycemic Coma

CMS’ Authority to Address the NQF’s “Never Events”

CMS applies its authorities in various ways, beyond the HAC payment provision, to combat “never events:” Conditions of participation for survey and

certification Quality Improvement Organization (QIO)

retrospective review Medicaid partnerships Coverage policy

CMS’ Authority to Address the NQF’s “Never Events”

National Coverage Determinations (NCDs) CMS is evaluating evidence regarding three

surgical “never events:” Surgery performed on the wrong body part Surgery performed on the wrong patient Wrong surgery performed on a patient

NCD tracking sheets are available at: http://www.cms.hhs.gov/mcd/index_list.asp?list_type=nca

CMS’ Authority to Address the NQF’s “Never Events”

State Medicaid Director Letter (SMD) Advises States about how to coordinate State

Medicaid Agency policy with Medicare HAC policy to preclude Medicaid payment for HACs when Medicare does not pay

http://www.cms.hhs.gov/SMDL/downloads/SMD073108.pdf

Present on Admission Indicator (POA)

CMS’ Implementation of POA Indicator Reporting

POA Indicator General Requirements

Present on admission (POA) is defined as present at the time the order for inpatient admission occurs Conditions that develop during an outpatient encounter,

including emergency department, observation, or outpatient surgery, are considered POA

POA indicator is assigned to Principal diagnosis Secondary diagnoses External cause of injury codes (Medicare requires

reporting only if E-code is reported as an additional diagnosis)

POA Indicator Reporting Options

POA Indicator Options and Definitions

Code Reason for Code

Y Diagnosis was present at time of inpatient admission.

N Diagnosis was not present at time of impatient admission.

U Documentation insufficient to determine if condition waspresent at the time of inpatient admission.

W Clinically undetermined.  Provider unable to clinically determine whether the condition was present at the time of inpatient admission.

1 Unreported/Not used.  Exempt from POA reporting.  This code is equivalent code of a blank on the UB-04; however, it was determined that blanks are undesirable when submitting this data via the 4010A.

POA Indicator ReportingOptions

POA indicator CMS pays the CC/MCC for HACs that are

coded as “Y” & “W” CMS does NOT pay the CC/MCC for

HACs that are coded “N” & “U”

POA Indicator Reporting Requires Accurate Documentation

“ A joint effort between the healthcare provider and the coder is essential to achieve complete and accurate documentation, code assignment, and reporting of diagnoses and procedures.”

ICD-9-CM Official Guidelines for Coding and Reporting

HAC & POAEnhancement & Future Issues

Future Enhancements to HAC payment provision Risk adjustment

Individual and population level

Rates of HACs for VBP Appropriate for some HACs

Uses of POA information Public reporting

Adoption of ICD-10 Example: 125 codes capturing size, depth, and location of

pressure ulcer

Expansion of the IPPS HAC payment provision to other settings

Discussion in the IRF, OPPS/ASC, SNF, LTCH regulations

Opportunities for HAC & POA Involvement

Updates to the CMS HAC & POA website: www.cms.hhs.gov/HospitalAcqCond/

FY 2010 Rulemaking

Hospital Open Door Forums

Hospital Listserv Messages

VBP Programs

Physician Quality Reporting Initiative (PQRI)

Quality and PQRI

PQRI has focused attention on measuring quality of care Foundation is evidence-based measures

developed by professionals Reporting data for quality measurement is

rewarded with financial incentive Measurement enables improvements in care Reporting is the first step toward pay for

performance

PQRI 2007

Tax Relief and Health Care Act of 2006 (TRHCA)

Authorized establishment of a physician quality reporting system

Included 1.5% incentive payment for satisfactorily reporting quality data on covered professional services furnished to Medicare beneficiaries July 1—December 31, 2007

PQRI 2007

2007 Participation Data About 16% or 100,000 professionals participated

by submitting at least one quality-data code Over half of participants or about 57,000 met the

statutory requirement to qualify for the incentive payment

2007 PQRI Payments have been made and feedback reports are available

PQRI 2008

Published in 2008 Medicare Physician Fee Schedule (PFS) Final Rule November 2007

119 measures 117 clinical measures 2 structural measures

Clinical measures apply to specialties accounting for over 95% of Medicare Part B spending

Structural measures apply broadly across specialties and disciplines

PQRI 2008

Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) authorized 2008 continuation of PQRI Eliminated cap on incentive payment Incentive payment remains 1.5% of total allowable

charges for Medicare PFS covered professional services furnished during reporting period

Required alternative reporting periods and alternative reporting criteria for 2008 and 2009

PQRI 2008

TRHCA authorized one approach for reporting

MMSEA required establishment of alternative reporting periods/reporting criteria for measures groups and registry based reporting

8 new options established effective April 15, 2008: See 2008 PQRI: Establishment of Alternative Reporting Periods and Reporting Criteria document posted at: www.cms.hhs.gov/PQRI

PQRI 2008 Incentive Payments

Must satisfactorily report under at least one method to qualify for 1.5% incentive

CMS will review data submitted via all methods to determine satisfactory reporting and eligibility Maximum incentive payment is 1.5% of total allowed PFS

charges for Part B covered services for the applicable reporting period

If qualify for more than one 2008 PQRI reporting method, then will receive incentive for longest reporting period

PQRI 2008 Goals

Expand Participation Expand measures for 2009 Implement alternative criteria for measure

groups and registry-based reporting Implement alternative reporting periods Prepare to accept EHR-reported measures

for 2009

PQRI & e-prescribingMIPPA Provisions

Section 131: PQRI for 2009 and Beyond Incentive increased to 2% Audiologists added as qualified professionals

Section 132: e-prescribing incentives Incentive 2% for 2009-10, then 1% for 2011-12, then 0.5% for

2013 Penalty of 1% begins in 2012, then 1.5% for 2013, then 2% for

2014 Hardship exception

Follow Physician Fee Schedule Rulemaking for more on 2009 PQRI and e-prescribing

Additional PQRI Resources

For more PQRI information you may contact your Regional Office, Carrier/MAC, or visit http://www.cms.hhs.gov/PQRI

VBP Initiatives

Physician Resource Use

Efficiency in the Quality Context

Efficiency Is One of the Institute of Medicine's Key Dimensions of Quality

1. Safety

2. Effectiveness

3. Patient-Centeredness

4. Timeliness

5. Efficiency: absence of waste, overuse, misuse, and errors

6. Equity

• Institute of Medicine: Crossing the Quality Chasm:

A New Health System for the 21st Century, March, 2001.

Resource Use Measurement

Goals

Measures that are meaningful, actionable, and fair

Compare expected to actual resource use

Link resource use to measures of quality and patient experiences of care

Measurement Challenges

Grouping claims into episodes of care -meaningfulness

Attribution - assigning responsibility

Benchmarks - making comparisons

Risk adjustment - fairness

Small numbers - reliability

Feedback reports - actionability

Episode of Care

What is it? All clinical interactions with the patient regarding a specific health

problem during a specified period of time

Why do it? More meaningful for a physician to be responsible for an episode

than to be held responsible for all care a patient receives

How is it measured? Commercial episode grouper software; future alternatives

possible

What is an Episode Grouper?

Software that organizes claims data into clinically coherent episodes Captures all clinical interactions with the patient

regarding a specific health problem during a specified period of time

Creates clinically homogeneous episodes Uses proprietary logic

Episode Timeline

Visit or procedure

Episode

Episode initiating event

Ancillary services--i.e., lab, radiology, etc.

Lookback period

Clean Period

Some events are not part of this episode

. . .

Episode Duration

. . .

Commercial Grouper Software

Medical Episode Groups (MEGs)

Thomson-Reuters (Medstat)

Released in 1998, periodically updated

570 episode groups (MEGs)

Based primarily on Dx codes

Episode Treatment Groups (ETGs)

United HealthCare (Ingenix/Symmetry)

Released in early 1990s, periodically updated

465 base episode groups (ETGs)

Based on Dx and procedure codes

Episode Grouper Evaluation

Grouper functionality

Grouper clinical logic

Phased pilot dissemination of physician resource use reports

Alternatives to groupers

Prepare claims data

Group claims into episodes

Risk-adjust the cost of each episode

Attribute each episode to one or more physicians

Calculate physician’s efficiency score

Compare score to a benchmark

Produce and distribute RURs

1

2

3

4

5

6

7

Creating Resource Use Reports

Physician Resource Use Reports

Phased Pilot Approach Phase I tasks (April 2008-March 2009)

Use both ETG and MEG episode groupers Standardize unit prices Assess several approaches to:

Risk adjustment Attribution Benchmarking

Produce RURs for several acute and chronic conditions Conduct in-depth interviews with physicians Pilot test with a large sample of providers

Physician Resource Use ReportsPilot

Potential Next Phase

Explore combining efficiency measures with quality measures

Continue to improve the validity, usability, and fairness of RURs

Scale-up if warranted

Physician Resource Use ReportsPilot

Statutory Authority

Medicare Improvement for Patients and Providers Act of 2008, Section 131(c) The Secretary shall establish a Physician

Feedback Program under which the Secretary shall use claims data (and may use other data) to provide confidential reports to physicians (and, as determined appropriate by the Secretary, to groups of physicians) that measure the resources involved in furnishing care. The Secretary may include information on the quality of care furnished by the physician (or group of physicians) in such reports.

Horizon Scanning and Opportunities for Participation

IOM Payment Incentives Report Three-part series: Pathways to Quality Health Care

MedPAC Ongoing studies and recommendations regarding VBP

Congress VBP legislation this session?

CMS Proposed Regulations Seeking public comment on the VBP building blocks

CMS Demonstrations and Pilots Periodic evaluations and opportunities to participate

Horizon Scanning and Opportunities for Participation

CMS Implementation of MMA, DRA, TRHCA, MMSEA, and MIPPA VBP provisions Demonstrations, P4R programs, VBP planning

Measure Development Foundation of VBP

Value-Driven Health Care Initiative Expanding nationwide

Quality Alliances and Quality Alliance Steering Committee AQA Alliance and HQA adoption of measure sets and

oversight of transparency initiative

Thank You

Thomas B. Valuck, MD, JDMedical Officer & Senior Adviser

Center for Medicare Management

Centers for Medicare & Medicaid Services