Value-based Purchasing

The Premier alliance has unique experience with value-based purchasing in Medicare. In October 2003, the Premier alliance and CMS launched the Hospital Quality Incentive Demonstration (HQID), a national pay-for-performance project designed to determine whether economic incentives are effective at improving the quality of inpatient hospital care. The CMS/Premier HQID is the first national demonstration to show that payment incentives can increase quality, and the project was approved for a three-year extension to further test value-based purchasing models for hospitals. In the Deficit Reduction Act of 2005, Congress mandated that CMS develop a plan for hospital value-based purchasing which was released in November 2007. In 2008, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) released a legislative discussion draft to implement a national Medicare hospital value-based purchasing program. Rep. Jason Altmire (D-PA) also introduced the Quality FIRST Act (H.R. 7067) in 2008. In the first three years of the demonstration project, the more than 1.1 million patients treated in five clinical areas at hospitals participating in the HQID are living longer and receiving the 30 recommended treatments in the 250 participating hospitals more frequently, supporting the theory that incentives can drive improvements in quality. CMS has awarded more than $24.5 million in incentive payments to the top hospitals participating in the HQID during the project’s first three years.

HQID demonstrates continued improvement for participating hospitals, resulting in lives saved:

�For hospitals participating in the HQID project, the average Composite Quality Score, an aggregate of all quality measures within each clinical area, has improved by a total of 18.6 percent since the project’s inception.

�Improvements in quality of care saved the lives of an estimated 2,500 heart attack patients across the first three years of the project, according to an analysis of mortality rates at hospitals participating in the project.

�The performance gap among participating hospitals is closing, as those hospitals with lower scores continue to improve and approach the demonstration’s top performers. This holds true for all types of participants – small and large, urban and rural, teaching and non-teaching.

�Additional research by the Premier alliance using the Hospital Compare dataset for April 2006 to March 2007 showed that HQID participants scored on average 7 percentage points higher (91 percent to 84 percent) than non-participants when evaluating 19 common Hospital Compare measures.

Based on the experience of the CMS/Premier Hospital Quality Incentive Demonstration project, Premier recommends the following:

�Financial incentives coupled with transparency should be used to improve quality. A combination of financial

Overview

Value-based Purchasing

incentives using new funds and public recognition improves the quality of care delivered by providers—beyond that of public reporting alone. Financial incentives should be linked to the specific performance areas measured.

�Federal standards development and Electronic Health Records (EHR) certification are needed for seamless quality reporting. Premier strongly encourages the mandatory adoption of transaction and semantic interoperability standards for the storage and transmission of data captured within an EHR. Further, data stored and transmitted in this standard format should be readily accessible by EHR users to facilitate the automatic submission of data required for quality reporting. EHR vendors should provide a nonproprietary utility that EHR users can invoke to access the data required for quality reporting. (Simply storing data in standard formats in proprietary databases does not render the data readily usable for quality reporting.)

�Measuring and reporting hospital performance should avoid the numerical ranking of facilities. As quality improves and composite scores cluster, differences in percentages become small and less meaningful. Additionally, ranking is not necessarily an indicator of quality improvement because hospitals can rise in rank relative to other hospitals, without actually

improving performance. The overall goal of any pay-for-performance initiative should be to drive quality improvement.

�Quality measures should align incentive. Many measures of hospital performance rely on the cooperation of the physicians responsible for providing care. Physician incentives should be aligned with those of the hospital to facilitate collaboration. As pay-for-performance extends to other providers, measurement should be aligned so that all providers have similar goals.

�Support for low-performing hospitals is needed for quality improvement. Part of the success of the HQID project can be attributed to the support provided to help participating hospitals make the changes needed to improve quality. Implementation of a broad value-based purchasing plan in Medicare should make resources available for quality improvement support in low-performing hospitals.

� Review of savings. An ongoing actuarial analysis should be conducted on the impact of the VBP to determine the savings to the government achieved by hospitals through quality improvement. Any legislation developed to implement a national Medicare hospital value-based purchasing system must stipulate that all funds stay within the program and be used for quality improvement incentives to hospitals and not for deficit reduction.

CMS/PREMIER HQID PROJECT PARTICIPANTS COMPOSITE QUALITY SCORE:

Trend of Quarterly Median (5th Decile) by Clinical Focus AreaOctober 1, 2003 – June 30, 2008 (Years 1, 2, & 3 Final Data; Years 4 and 5 Preliminary Data)

CMS HQID Composite Quality Score C M S / P r e m i e r H Q I D P r o j e c t P a r t i c i p a n ts C o m p o s i te Q u a l i ty S c o r e :

T r e n d o f Q u a r t e r l y M e d i a n (5 th D e c i l e ) b y C l i n i c a l F o c u s A r e a

O c to b e r 1 , 2 0 0 3 - J u n e 3 0 , 2 0 0 8 (Y e a r s 1 , 2 , & 3 F i n a l D a ta ; Y e a r s 4 a n d 5 P r e l i m i n a r y D a ta )

89.6%

85.1%

70.0%

64.0%

85.1%

90.0%

85.9%

73.1%

68.1%

86.7%

91.5%

89.4%

78.1%

73.1%

88.7%

92.5%

90.6%

80.0%

76.1%

90.9%

93.5% 93.7%

82.5%

78.2%

91.6%

93.4%94.9%

82.7%81.6%

93.4%

95.1%96.2%

84.8%

83.0%

95.2%95.77%97.01%

86.30%

84.38%

95.92%96.0%

96.8%

88.5%

86.7%

96.6%96.1%

98.3%

89.3% 88.8%

97.1%96.8%

98.4%

90.1% 90.0%

97.8%96.8%

98.4%

91.4%

89.9%

97.9%97%98%

92%90%

98%

97.0%97.7%

92.4%91.6%

97.9%97.6% 97.8%

93.5% 93.2%

98.0%97.5%98.4%

93.4% 93.4%

98.1%98.3% 98.5%

94.2% 94.2%

97.4%

92.3%

98.27%99.01%

94.85% 94.90%

97.46%

94.11%

98.54% 99.19%

95.90%95.38%

98.16%

95.27%

55 %

60 %

65 %

70 %

75 %

80 %

85 %

90 %

95 %

1 00%

H ea r t A t t a c k H ea r t B y pa s s S u r ge r y P n eum on ia H ea r t F a ilu r e H ip an d K nee S C IP

C l i n i c a l F o c u s A r e a

4Q 03 1 Q 0 4 2Q 04 3Q 04 4 Q 0 4 1 Q 05 2Q 05 3Q 0 5 4 Q 05 1Q 06 2Q 0 6 3 Q 0 6 4Q 06 1Q 07 2 Q 0 7 3Q 07

4Q 07 1 Q 0 8 2Q 08

Value-based Purchasing

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