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Other Value-Based Incentive Programs

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The cost of healthcare has led policy makers to rethink how care is delivered and providers are paid. Fee-for-service payments are likely to continue their decline as we transition towards a value driven healthcare system that rewards high quality and cost effective patient care. Established under authority of the Affordable Care Act (ACA), the Center for Medicare and Medicaid Innovation will play a central role in this transition by testing and implementing payment models that demonstrate quality improvements and cost savings.

The following resources provide information about some of these payment models that are focused on encouraging high value care delivery through greater integration, improved care coordination, and a focus on patient safety. These models are designed to foster a culture of accountability that rewards high quality and cost effective care.

Accountable Care Organizations (ACOs) are legal entities which are designed to allow integrated networks of providers that improve patient outcomes and lower costs to share in the savings that come from more integrated and coordinated care. With the passage of the Affordable Care Act, the Center for Medicare and Medicaid Innovation (CMMI) has become a leading force in efforts to encourage ACOs and other delivery system reforms.

The Medicare Shared Savings Program is the most well known of these efforts but CMMI also has launched smaller initiatives, such as the Pioneer ACO Model and Advanced Payment Initiative. All of these programs are modeled on Medicare's Physician Group Practice (PGP) Demonstration Project, which demonstrated cost savings from greater integration while preserving fee-for-service payments.

Shared Savings Program

Pioneer ACO Model

Advanced Payment Initiative

IDSA is generally supportive of the ACO concept but believes that their development must coincide with a full range of waivers, safe harbors, and exceptions to federal anti-trust laws as a means encourage greater integration. The Society also strongly supports shared savings payments for infection prevention, antimicrobial stewardship, and other systems-level activities that are focused on avoiding healthcare-related complications and their associated costs.

Medicare was required by the Affordable Care Act to implement a program by October 2012 that links a portion of hospitals payments to their quality and cost of care. Under the Hospital Value-Based Purchasing (HVBP) Program, hospitals will receive incentive payments based on their relative performance on certain measures or how much their performance improves compared to a baseline period.

Incentive Payment Withhold

The HVBP Program will fund incentive payments through a percentage withhold the hospitals' Medicare payments for each discharge. The initial incentive withhold will be 1 percent but will increase to 2 percent over 5 years. High performing hospitals could receive incentive payments in excess of their initial withhold while payments to low performing hospitals will remain below their initial withhold.

Hospitals Value-Based Purchasing Percent Withhold

FY 2013


FY 2014


FY 2015


FY 2016


FY 2017



Performance Measures

Performance measures for the Hospital Value-Based Purchasing Program will be drawn from the Hospital Inpatient Quality Reporting program (Hospital IQR), the Medicare pay-for-reporting program for hospitals. This ensures that hospitals are familiar with reporting measures before basing payments on their performance. The initial performance period (FY 2013) will include 12 clinical process of care measures and 1 patient experience of care measure, which is a composite of several patient experience of care indicators from the Hospital Consumer Assessment of Healthcare Providers & Systems Survey (HCAHPS).

In FY 2014, hospitals payments will be tied to performance on 17 measures: 13 clinical process of care measures, three mortality measures, and the HCAHPS.

Avoidable hospital readmissions are a recognized quality of care issue, costing our healthcare system billions of dollars that could be spent elsewhere. Nearly one in five Medicare patients is readmitted within 30 days representing a cost of over $26 billion annually. The Partnership for Patients acknowledged the magnitude of the problem by establishing as a primary goal a 20 percent reduction in hospital readmissions.

Beginning in 2012, the Affordable Care Act requires Medicare to reduce hospitals' payments for potentially preventable readmissions for the following three conditions: acute myocardial infarction (AMI), pneumonia (PN), and heart failure (HF). These conditions were chosen because they represent high volume and cost readmissions for which there are 30-day risk standardized readmission measures that are endorsed by the National Quality Forum.

For 2015, the readmissions reduction program will expand to include patients admitted for an acute exacerbation of chronic obstructive pulmonary disease (COPD) and patients admitted for elective total hip arthroplasty (THA) and total knee arthroplasty (TKA).

The readmissions payment policy will reduce payments to hospitals that have excess Medicare readmissions for the three conditions (AMI, PN, & HF) by applying an adjustment factor against their base operating DRG payments. This policy will only apply to hospitals with 25 or more relevant discharges. Medicare has the authority to expand the policy to additional conditions in future years and to release information to the public on hospitals' readmission rates through the Hospital Compare Website.

More information can be found on the CMS Readmissions Reduction Program page.

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