The most improved pathway, cleverly called “improvement,” is for a hospital to improve its performance over its previous baseline, even if it fails to attain a high score relative to others. Measurement of the first baseline year ran from July 2010 through March 2011, and will be used as the reference point for performance from July 2011 through March 2012.
The precise amount of the payment for either of the two methods above is based on a sliding scale rather than an all-or-none threshold. SHM’s website (www.hospitalmedicine.org/hvbp) has an example of this calculation. A simple way to think of it is that a hospital won’t have to do a lot to earn back some portion of the amount withheld, but it has to hit a home run to earn back more than that.
The Dollars at Risk
It is worth thinking about the most a hospital could lose or gain under HVBP. Let’s take an example of a hospital that is paid $50 million annually by Medicare across all DRGs (this would be a pretty small hospital). In 2013, Medicare will pay that hospital only $49.5 million; that is, it will withhold 1% ($500,000) as part of the HVBP program. After the hospital’s Total Performance Score is computed, Medicare might pay more to the hospital in the form of an “add on” to the hospital’s typical DRG payments. If performance stinks or is worse than most hospitals and does not improve significantly over its own baseline, Medicare might not pay a nickel more. But for respectable performance, it might be paid 80% of the amount withheld—$400,000, in this example. So this hypothetical hospital would end up being a “net loser” of $100,000. By 2017, when 2% is withheld, the dollars at risk would be double.
From a practical perspective, the amount by which reimbursement will go up or down for most hospitals will be significantly less than the total withhold amount for most hospitals, so it probably won’t be enough to result in financial disaster or great profits. (Your hospital CFO may dispute this conclusion and you should listen to them.) But because a new “grading curve” is established each year, a score that puts a hospital in a financially attractive category one year might not look so good the next year. Therefore, a hospital whose performance stands still will likely become a net loser within a year or two.
Even if you were to conclude that the potential financial upside isn’t compelling enough to devote a lot of energy to perform well, the fact that most of the measures really do matter to our patients, and that this information is publicly reported, means every hospital should do whatever it takes to perform well. I suspect that patients and employers, as well as all types of payors, will pay more and more attention to your hospital’s performance and overall hospital volume affected in locales where patients have a choice of more than one hospital.
Learn More
I’ve provided only a very general HVBP overview here. Most hospitalist groups should identify at least one person who develops meaningful expertise in this program and other components of healthcare reform (i.e. bundled payments, penalties for excess readmissions, and penalties for hospital-acquired conditions). SHM is a terrific educational resource for these things and has a very informative HVBP toolkit available via its website.