Medical Device Daily Washington Editor

WASHINGTON — The pay-for-performance (P4P) project continues to offer impressive numbers, and the much-maligned rural hospital is outshining its more urbane city counterparts in improved scores. The question still to be answered is whether P4P will bring down the Medicare budget or simply drive up costs, regardless of the impact on care.

The Jan. 24 report by Premier (Charlotte, North Carolina) on its multi-center Hospital Quality Improvement Demonstration (HQID) covers the numbers generated by the first two years of the project, commenced in October 2003. The report covers the outcomes for more than 250 hospitals in 37 states. Premier is a group of 200 not-for-profit hospital and healthcare systems that operate a total of 1,700 hospitals and other facilities.

One of the more interesting findings in the report is that “the data show a compression of the ranges, or a reduction in variation, across project participants” even as the leading hospitals’ scores rose.

The report also states that “[r]ural hospitals, in particular, demonstrated remarkable improvement” in the first year, with those 21 hospitals accounting for an overall improvement of 7.3%, higher than the overall average of 6.6%. More than 80% of rural hospitals finished in the top half of the total in average improvement for the first year.

The cumulative improvement for both the first and second years for rural hospitals was 12.99% “across all focus areas compared to the average improvement for all hospitals . . . which was 11.82%,” according to the Premier report.

The announcement by CMS stated that the second year performance earned 115 of the participating hospitals a total of almost $8.7 million in incentive payments. Leslie Norwalk, acting CMS administrator, said that the numbers “provide one more piece of solid evidence that pay-for-performance works.”

The measures involved in the Premier project are of acute myocardial infarction (AMI), heart failure, coronary artery bypass graft (CABG), pneumonia, and hip and knee replacement. The payments go to the top quintile of hospitals in each of those five clinical areas, with the top decile netting a 2% bonus and hospitals in the second decile snaring a 1% bonus.

Hackensack University Medical Center (New Jersey) reportedly placed in the top five for each category for the second consecutive year, earning about $744,000, and the Charleston Area Medical Center (West Virginia) earned slightly more than $700,000.

As for the total scores across all institutions, improvements in AMI went up from 87.5% to 94.4%, from 84.8% to 93.8% for patients with coronary artery bypass graft, and from 64.5% to 82.4% for patients with heart failure. For treatment of pneumonia, the aggregate scores jumped from 69.3% to 85.8%, and for patients with hip and knee replacement, from 84.6% to 93.4%.

The Premier document noted that in the third year of the pilot, “hospitals that fail to improve their performance in a specific clinical area beyond the minimum threshold . . . will be subject to a payment reduction of 2.0% and 1.0% for the bottom and second-to-bottom quintiles.”

Alven Weil, Premier’s public relations manager for informatics, told Medical Device Daily that the bonus money was not always enough to cover the cost of improved care. “For some yes, but for most no.” However, he made the case that “[t]he point is that, though the money is a nice perk, it is not the ‘goal’ of the project for most hospitals,” which are involved in order to “find new ways to improve patient care.

“Also, the positive recognition provided by CMS and Premier is important for the hospitals,” Weil said.

CMS proposal extends 25% rule to all LTCHs

Thanks to a heads-up by the Medicare Payment Advisory Commission (MedPAC), Congress has its eye on long-term care hospitals (LTCHs), and both houses of Congress are stitching together legislation designed to put a lid on the growth of outlays for this program by revamping admissions criteria without restricting the ratio of admissions from a single acute care hospital (MDD, Jan. 26).

However, CMS is not waiting for word to come down from on high to push forward with the belt-tightening. It has proposed to extend the so-called 25% rule to all LTCHs, regardless of location.

CMS released its plan to restrain LTCH spending, in an announcement dated Jan. 25, with some tweaking of regulations that acting administrator Leslie Norwalk said would “promote accurate payment for patients who need inpatient care.” The agency has opened a 60-day comment period, during which opponents of the measure will surely make their voices heard on Capitol Hill.

Under the proposed rule, Medicare will pay out approximately $4.4 billion to LTCHs in 2008 under a prospective payment system (PPS), which is based on the system used to prospectively reimburse acute care hospitals. CMS’s position is that “a significant portion of the estimated 3.49% increase in observed case mix between FY 2004 and FY 2005 is due to changes in coding practices and documentation rather than to the treatment of more resource intensive patients,” according to the agency statement.

The proposed update to the PPS of 0.71% for rate year 2008, CMS pointed out, “is higher than the zero percent update recommended by the Medicare Payment Advisory Commission earlier this year.”

CMS is also pushing the idea of extending the 25% rule “to virtually all LTCHs for which more than 25% (or the applicable percentage in certain special circumstances) of its discharged patients were admitted from an individual hospital, regardless of whether that hospital was located in the general vicinity of the LTCH.”

Previously, the 25% rule covered only the hospital-within-a-hospital arrangement as well as LTCHs within the immediate vicinity of the larger acute care hospital.

Don May, VP of policy for the American Hospital Association (Chicago), told MDD that the proposed change to the 25% rule is “bad public policy” and that it “does not get to the heart of the issue, which is [deciding] which patients will benefit most from the services.”

Patient criteria should drive the attempt to allocate resources, he said. As for the agency’s claim that the change in case mix is more a question of documentation than actual services, May said that this had been accounted for in the previous update and that “[t]he concern we have is that they may be taking something into account that has already been taken into account.”

In a prepared statement, William Walters, CEO of the Acute Long Term Hospital Association (Alexandria, Virginia) said of the .71% update that LTCHs “should receive a full market-basket update” because margins “have been substantially suppressed.”

He argued that the agency “should reconsider its proposed rule in light of legislation recently introduced in Congress” which he said would “achieve savings in the LTCH space while also ensuring that patients have access.”