Payment Matters: Rewarding Quality? Not Exactly - CMS Proposes Value-Based Purchasing Rule


After years of hinting that the Medicare payment practices would be modified so that the Centers for Medicare and Medicaid Services (CMS) would no longer be a passive purchaser of health care services, CMS released a proposed rule to implement a hospital value-based purchasing program under which a portion of hospital payment for inpatient services would be based on quality of care. The proposed rule [PDF] was published in the Federal Register on January 13, 2011, and implements Section 3001(a) of the Patient Protection and Affordable Care Act (Pub. L. 111-148) (ACA), which requires CMS to establish a value based purchasing program applicable to hospital discharges occurring on or after October 1, 2012. Beginning in fiscal year (FY) 2013, CMS proposes that hospitals will receive value-based incentive payments that are based on the hospital meeting specified performance standards. In accordance with the statute, the program must be budget neutral and, thus, will be funded by a 1% reduction in base operating hospital DRG payments for each discharge in FY 2013, which will incrementally increase to a 2% reduction by FY 2017.

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