CMS Proposes Hospital Value-Based Purchasing Rules

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On January 7, 2011, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule to implement a hospital value-based purchasing (VBP) program as mandated by the Affordable Care Act (ACA). The program would apply to payments for discharges occurring on or after October 1, 2012, and would reward with higher payments hospitals that score well on quality care measures. Comments are due by March 8, 2011. The text of the proposed rule is available here.

The proposed VBP program builds on quality measures already reported by hospitals under the Medicare Hospital Inpatient Quality Reporting Program (Hospital IQR Program), as well as borrowing heavily from a 2007 report that CMS submitted to Congress entitled “Plan to Implement a Medicare Hospital Value-Based Purchasing Program.” Pursuant to the ACA, VBP program incentive payments would be funded by reducing hospitals’ base operating diagnosis related group payments by 1% in fiscal year (FY) 2013, rising to 2% by FY 2017, all of which would be paid out as incentives. The Hospital IQR Program would operate in parallel to the proposed VBP program, and a hospital would be required to continue to participate in the reporting program to avoid payment penalties.

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