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Value-Based Purchasing: What's the score?

Raso, Rosanne MS, RN, NEA-BC

Nursing Management (Springhouse): May 2013 - Volume 44 - Issue 5 - p 28–34
doi: 10.1097/
Feature: CE Connection

How did your organization fare when the preliminary results of Medicare's VBPprogram were posted in late 2012?

Rosanne Raso is the senior vice president of patient care services and chief nursing officer at Lutheran Medical Center in Brooklyn, N.Y., and a Nursing Management editorial board member.

Reward or penalty, step up to the plate

The author and planners have disclosed that they have no financial relationships related to this article.



How did your organization fare when the preliminary results of Medicare's Value-Based Purchasing (VBP) program were posted in late 2012? Effective this year, all hospitals are facing up to a 1% reward or penalty of their total Medicare reimbursement based on the results of 20 clinical process and patient experience measures. In hospitals with a large proportion of Medicare patients and slim profit margins, this 1% may mean the difference between being in the black and being in the red. The VBP program is projected to grow as performance measures expand and the reimbursement risk increases. Have you prepared for nursing's essential contribution to value-based care?

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Covering the bases

VBP began with the Deficit Reduction Act of 2005 as a subset of the Centers for Medicare and Medicaid Services (CMS) Hospital Inpatient Quality Reporting (IQR) program. In the IQR program, hospitals are only required to report their quality measures to receive a 2% incentive, known as “pay for reporting;” achievement levels aren't evaluated. This program has grown from an initial 10 quality measures to over 70 measures. The Joint Commission's required core measures are intentionally aligned with IQR measures so that hospital data collection efforts are consistent, although some variation still exists.

The Deficit Reduction Act also required outcome and efficiency measures to be made publicly available under the IQR program. Publicly reported information is provided by the CMS on the Hospital Compare website ( to help consumers assess hospital performance. The posted information is usually 9 months to more than 1 year behind, for example, a measurement period ending in December 2011 may not have appeared until late in 2012. The following data categories are currently available online, and VBP results will be added this year:

  • patient survey results (Hospital Consumer Assessment of Healthcare Providers and Systems [HCAHPS])
  • timely and effective care (core measures)
  • readmissions, complications, and deaths
  • use of medical imagingMedicare volume and payment.1

The original VBP concepts were published as “pay for performance.” (See VBP in a nutshell.) An intense discussion ensued, and continues, on the value of tying quality to reimbursement, as well as which evidence-based measures should be included. Needless to say, there's an argument for both sides. Will VBP impact quality or not? Are the evidence-based process measures affecting patient outcomes? Is patient experience a valid indicator for value-based care? Does the scoring system penalize and reward the right hospitals? Does the VBP program adversely affect safety net hospitals that have an increased percentage of disadvantaged patients? Time will tell as the quest for improved healthcare quality in our country continues.

Major legislation to reform healthcare in the United States under the Affordable Care Act of 2010 mandated VBP implementation. All base Medicare diagnosis-related group payments were reduced by 1% starting in fiscal year (FY) 2013 (October 1, 2012), an amount approximated at $1 billion. The money goes into a pool, and hospitals can earn back the 1%, plus up to another 1%, based on VBP results. This is a budget-neutral program for the government, not a cut, because the money is completely redistributed. Its purpose is underscored because it isn't a budget cut—shifting reimbursement to reward quality. The percentage to be withheld increases to 1.25% in FY 2014 and rises to 2% in FY 2017. (See Figure 1.)

Figure 1

Figure 1

The VBP program requisites include that the measures are reported in the IQR program, published on the Hospital Compare website for 1 year, proposed by the CMS during the rulemaking process, and not “topped out.” This means that the 90th and 75th percentiles can't be statistically the same and the deviation from the mean shows little variation with 5% high/low exclusion. These topped out, very compliant IQR measures, such as aspirin on arrival for acute myocardial infarction (AMI) patients or appropriate hair removal for surgical patients, are excluded from the VBP program.

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New penalties: Fair or foul?

The VBP program is in addition to the Medicare Readmissions Reduction program, which penalizes hospitals for readmissions higher than expected by up to 1% of their Medicare revenue in FY 2013.3 The penalty is determined by a calculation of an excess readmission ratio based on 30-day readmission rates for AMI, heart failure, and pneumonia. The penalty will rise to 2% in 2014.

Also in effect since the Deficit Reduction Act of 2005 are the penalties for hospital-acquired conditions (HACs). No additional reimbursement is given for a list of HACs not present on admission, including hospital-acquired pressure ulcers, surgical site infections (SSIs), falls with injury, and others. The case is paid as though the secondary diagnosis isn't present. The HAC program is expected to expand in FY 2015 to include an additional 1% penalty if a hospital scores in the bottom quartile compared with the rest of the country.

As all three programs collide (VBP, Readmissions Reduction, and HAC), the potential penalties are climbing to 5% and higher, a very significant reduction. Of course, this is aligned with the goals and mandates of the government to improve healthcare quality and reduce costs. The challenge is yours to do better with less, which isn't necessarily an oxymoron.

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VBP game plan

There were 20 measures for FY 2013, split between two domains: clinical processes and patient experience. Nursing care contributes to many of these measures. As managers and leaders, we must use this opportunity to plan and implement effective team-based strategies to achieve organizational success. Consider what your engagement level has been for these measures as you review the list, and whether your staff is equally involved in performance improvement. Nursing's value is paramount, especially now that there are dollars attached to our outcomes.

The first year of the VBP program affecting reimbursement (FY 2013) expected delivery of 12 evidence-based clinical interventions:

  • AMI
    • —fibrinolytic in 30 minutes, or
    • —percutaneous coronary intervention in 90 minutes
  • heart failure
    • —discharge instructions
  • pneumonia
    • —blood cultures drawn before antibiotic
    • —appropriate antibiotic
  • Surgical Care Improvement Project
    • —venous thromboembolism (VTE) prevention orders
    • —VTE prevention implemented within 24 hours
    • —antibiotic 1 hour before surgery
    • —appropriate antibiotic
    • —stop antibiotic 24 hours postsurgery
    • —glucose control for open-heart surgery patients
    • —beta-blocker during perioperative period.

There were eight HCAHPS measures on the patient experience side. Seven are composite measures, meaning that they're comprised of more than one question. Only top box (“always”) responses count in the scores, which means that every interaction is important during a patient's stay. Again, nursing's role is imperative. These measures include:

  • nursing communication (listening, clarity, respect)
  • physician communication (listening, clarity, respect)
  • responsiveness (call bells, toileting)
  • environment of care (cleanliness, quietness)
  • pain management (control, staff members did everything they could to help with pain)
  • medication communication (new medications, adverse reactions)
  • discharge information (postdischarge information, written instructions)
  • overall rating on a scale of 0 to 10, with only the scores of 9 or 10 counting as the top box result.
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Scoreboard standings

Scoring is complicated. Basically, the 20 measures are given points for either achievement or improvement, with a potential total of 100 points in each domain, including up to 20 consistency points for the HCAHPS measures. Then, the score is weighted, with clinical processes at 70% and patient experience at 30% for FY 2013, for a grand total of 0% to 100%. Your total score determines your earn-back or penalty for the next FY based on an adjustment factor for budget neutrality. (See Tables 1 and 2.) Remember, this program isn't a budget cut, so whatever money is in the 1% withhold pool is redistributed back to hospitals based on total scores in the performance period.

Table 1

Table 1

Table 2

Table 2

A baseline period and a performance period were established to evaluate consistency, achievement, and improvement for each measure as compared with all other hospitals. The first baseline period was between July 1, 2009 and March 31, 2010; the first performance period was between July 1, 2011 and March 31, 2012.4 Comparative measurements determine the effect on your Medicare revenue. Current FY 2013 Medicare reimbursement was adjusted by −1% to +1% based on your score during the performance period.

Some definitions are needed to explain the scoring process:

  • Floor. The 0th percentile or minimum performance. For example, the floor for nurse communication is 43%. (See Figure 2.)
  • Threshold. The 50th percentile, meaning half of the hospitals are higher and half lower. This is the minimum performance level to receive reimbursement. Using the same example of nurse communication, the threshold is 76%.
  • Benchmark. The mean of the top decile (95th percentile) during the baseline period; the benchmarks are typically very high. This is the performance level you must reach to receive all 10 points for the measure. For example, the benchmark for the pneumonia measures, and many other process measures, is 100% for FY 2014. The benchmarks for patient experience are lower, ranging from 71% to 88%. However, with the 50th percentile at 59% to 82%, there's a long way to go to the top decile. The benchmark for nurse communication is 85%, representing high performance. Are 85% of your patients always experiencing respectful and clear nurse communication?
  • Achievement range. This compares your performance—on a range from the threshold to the benchmark, between “good” and “great” (0 to 10 points)—with all hospitals. If your nurse communication results were 81%, that's halfway between the threshold (76%) and the benchmark (85%), so you would receive approximately 5 points. For a clinical example, let's say your blood culture before antibiotics performance was 95%. The threshold was 96% and the benchmark 100%, so you'll receive 0 points. It's a sea change to have 95% performance regarded as 0; the expectations are extremely high.
  • Improvement range. This compares your performance on a range from your own baseline to the benchmark (0 to 10 points). This helps hospitals that weren't high performers in the baseline period and are making strides in improving their measures. It compares you to yourself. If your baseline nurse communication results were 70% (below threshold) and you improved to 81%, you would receive approximately 7 or 8 improvement points. Because this score is higher, it would be used for the final score instead of the achievement score of 5 in the previous example.
  • Consistency score. Computed for HCAHPS only, equaling 0 to 20 points assigned from 0th percentile (floor) to 50th percentile (threshold) for each measure. The lowest score of all measures is your consistency score. If you're over the 50th percentile in all measures, you're assigned the full 20 points. This means that all of the HCAHPS indicators are important in the VBP program; one low scoring measure affects 20% of your HCAHPS points.
Figure 2

Figure 2

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Rookie year performance

Based on the dry run reported by the CMS in October 2012, it's expected that nationwide approximately 40% of the 3,423 hospitals involved in the VBP program are better performing and will receive their 1% plus up to another 0.9%. Approximately 40% are lower performing hospitals that will receive less than 1%. The remaining participating hospitals will receive just the 1% withhold back.5 The dollar amounts are, of course, relative to the total Medicare revenue of the hospital. The final impact of the VBP program by state isn't yet available. It's interesting that the 10 best performing hospitals in the first round were those with less than 30 beds or specialty hospitals. In general, large, urban, teaching hospitals don't score as well on HCAHPS as small, rural, nonteaching hospitals.

Modern Healthcare looked for a correlation between process and outcome incentives and did a comparison between the results of the VBP and Readmissions Reduction programs. The researchers found divergence, not convergence, which may be explained in several ways, such as relevance of process measures to outcome measures and timing of performance periods.6 The debate continues.

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Your turn at bat

A new domain was added for FY 2014 (starting October 1, 2013)—outcomesaccounting for 25% of the total VBP score. The new outcome measures were the 30-day mortality rates for AMI, heart failure, and pneumonia. Patient experience measures still count for 30%; however, the weight of the process measures decreased to 45%. A new process measure was added for urinary catheter removal within 48 hours of surgery, with a very high benchmark of 99.9%.

The performance periods for FY 2014 are already over. Both the process and patient experience performance periods ended in December 2012. The new outcome measure performance period ended in June 2012; the baseline period was between 2009 and 2010. Unfortunately, your opportunity to affect FY 2014 reimbursement has passed.

You do have a chance to affect FY 2015—the clinical and patient experience performance periods are underway, ending in December 2013. There are two new outcome measures: central line-associated bloodstream infections (CLABSIS) and a composite of patient safety indicators (PSIs) from the Agency for Healthcare Research and Quality. The PSIs include several post-op complications, respiratory failure, deep vein thrombosis, and pressure ulcers. It seems that the HAC program is starting to spill into VBP, a possible double penalty for hospitals. Also in FY 2015, another domain will be added—efficiencywith a 20% weighting. The efficiency measure will be risk-adjusted Medicare spending per beneficiary from 3 days before admission to 30 days after hospital discharge.7 (See Figure 3.)

Figure 3

Figure 3

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Rounding home

The healthcare environment is rapidly evolving into one in which quality, cost, accountability, risk, and population health are vital and tied to revenue. We want to be a value-based performer not only for Medicare/CMS, but also for other insurers and provider groups. The business case has been made for quality processes and outcomes, but because the dollar impact can be low in this first year, it may not be enough incentive to fuel change. However, the future impact combined with other penalties is quite compelling. It's interesting that clinical quality indicators are aligning in many areas: the IQR and VBP programs, The Joint Commission core measures, meaningful use, the CMS, and other payers. This is good news in terms of multiple gains from successful efforts.

Step up to the plate at your organization. Cultural transformation is needed to succeed; traditional, linear performance improvement projects will no longer suffice. Our mindset has to be one of high expectations at all times and excellence across the board. Nurse leaders must advocate for the resources needed to achieve the expected level of performance. There are research links to nurse staffing levels and patient outcomes, which can provide some evidence-based support.

The work must be interprofessional and team-based because silo work is too limiting to achieve complete success in improving patient safety and outcomes. Know your data, share your results and the financial impact, and use them as a lightning rod for change. Review your processes and consider rapid cycle improvement techniques to hardwire compliance. Investigate every failure and learn from it. Monitor concurrently and provide feedback to accountable parties at every staff and leadership level. All of this must be framed as an organizational imperative, with resources for change and all stakeholders on board.

We anticipate learning the significance of VBP in improving quality at the point of care and its impact on patient outcomes as the program evolves. It's a new, transparent world of pay-for-quality, with our work impacting the hospital's bottom line.

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VBP in a nutshell

The VBP program speaks to the heart of what's changing in healthcare reimbursement—a shift to payment for outcomes and quality. According to former CMS administrator Dr. Don Berwick, “Instead of payment that asks, 'How much did you do?' the Affordable Care Act clearly moves us toward payment that asks, 'How well did you do?' and, more importantly, 'How well did the patient do?'”2

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2. Centers for Medicare and Medicaid Services. Hospital value-based purchasing program fact sheet.
3. Department of Health and Human Services. Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Fiscal Year 2013 Rates; Hospitals' Resident Caps for Graduate Medical Education Payment Purposes; Quality Reporting Requirements for Specific Providers and for Ambulatory Surgical Centers; Final Rule. Federal Register. August 31, 2012;77(170):53531.
© 2013 by Lippincott Williams & Wilkins, Inc.