Medicare spending per beneficiary is a measure of efficiency which underscores the importance of limiting readmissions. Some hospital groups reject the move, but at least one CMO describes it as "not completely unreasonable."
Like it or not, hospitals are bracing for a new, and some leaders say increasingly important, Medicare quality measure that is influencing how much they're reimbursed with discharges starting on Oct. 1, 2014.
The measure is efficiency, or Medicare spending per beneficiary. Against hospital groups' objections, officials for the Centers for Medicare & Medicaid Services added the score to the value-based purchasing incentive program algorithm, with a performance period ending Dec. 31, 2013, with an initial weight of 20%, increasing to 25% and possibly higher in later years.
The score each hospital receives, available publicly on Hospital Compare, purports to show how efficiently each organization delivers an episode of care, defined as the period starting three days before beneficiaries' hospital admissions and ending 30 days after discharge for all services paid under Medicare Part A and Part B.
Arguably, most of that time patients are not in the hospital, but under the care of providers outside of a hospital's direct control.
In one spreadsheet, Medicare now shows how much was spent on average to provide care in each of seven categories at each hospital: home health, hospice, inpatient, outpatient, skilled nursing, durable medical equipment, and carrier (physician, ambulatory surgical center), and how each category compares to state and national spending.
"I'll give Medicare some credit on this metric; it's not completely unreasonable," says Jeffrey DiLisi, MD, vice president and chief medical officer for 342-bed Virginia Hospital Center in Arlington, VA. "Actually, it's a pretty fair metric… because it's really letting you look at all the things that are set up at patient discharge, or the transition of care."
The new efficiency measure underscores the importance of limiting readmissions, he adds, because much of the cost shows up for inpatient care within 30 days of a patient's discharge, i.e., a readmission. That may be a form of double jeopardy, duplicating Medicare's penalty on hospitals with higher rates of readmissions up to 3% of their Medicare base DRG payments, he acknowledges.
But that's okay, DeLisi says, "because we all know that nationwide, everybody has too many readmissions, and that we probably don't do a good enough job with transitions of care. So that would be the first place I would go to reduce costs."
The efficiency measure may also incentivize hospitals paid flat rates under the DRG system not to push services into post-discharge settings where they are more expensive, and partially paid by the patient, under part B, DiLisi says.
"If you were ordering outpatient radiology studies that maybe you could have done in-house (during the patient's stay, and thus absorbed within the flat rate), now you're going to get hit for doing that, because that cost will show up" with a worse episode efficiency score.
With the efficiency measure, Medicare is "tracking reasonable things and giving granularity for comparisons with our competitors. We can now see what everybody else is spending on these services."
The quality improvement and group purchasing organization, Premier Inc., and the American Hospital Association don't agree that the efficiency measure is completely ready to be a pay-for-performance measure, however.
Premier argues the source of post-discharge spending, and sometimes the reason for readmissions, is often out of the hospital's control, because it relies on physician choices.
"Hospital A and hospital B could have the same inpatient and outpatient per beneficiary spending, but the physicians [of] hospital A could rely more frequently on skilled nursing and rehabilitation while hospital B's physicians could rely more on home health care. This will make hospital A look far more costly than B, even the source of the spending is outside of the control of the hospital," Premier's senior vice president for public affairs Blair Childs wrote CMS.
Additionally, Childs wrote, CMS is not adjusting each hospital's score based on patients' socioeconomic status, which can greatly influence spending and also is not within a hospital's control. Low-income patients may not have family systems of support, and may require more expensive post-acute care services. "There is clear evidence that variations in socioeconomic factors and beneficiary characteristics affect healthcare expenditures," he wrote.
In a letter in June, the AHA told CMS it "is concerned" because what is an appropriate level of services provided by certain specialists, such as radiologists and pathologists, during a hospitalization "is simply not yet known."
"Moreover," the AHA wrote, "this measure is being proposed as a hospital performance measure even though it reflects the performance of physicians…Some hospitals directly employ physicians; it may be reasonable to measure such hospitals on a physician services measure.
Other hospitals, however, contract with individual physicians or physician groups that have more independence, "making it difficult to assign accountability for physician services measures solely to hospitals."
The AHA cautions "that such measures should not be used to push only toward the lowest possible cost. In some cases, that low cost may be achieved when the patient does not get needed services."
Another concern expressed by both the AHA and Premier is that the efficiency measure has not yet been endorsed by the National Quality Forum.
In its final rule on the value-based purchasing algorithm, CMS disagreed.
"We believe that the MSPB measure is appropriately risk-adjusted, that its reliability has been established, and that it incentivizes hospitals to exert their control of episode spending. We continue to believe that a measure of cost is integral in recognizing and incentivizing hospitals involved in providing high quality care to the beneficiaries they serve, at a lower cost to Medicare."
As for NQF endorsement, CMS says it expects that to come this October.
In the spreadsheets CMS has released clearly show huge variation in hospital efficiency and cost.
For example, East Valley Hospital Medical Center in Glendora, CA, is shown as having among the most expensive "Complete Episode" of care costs, $27,390, for any non-specialized general acute care hospital in the country, far more than the $19,093 average for hospitals in California and the $18,358 average total spending for hospitals nationally.
But Estella Renteria, East Valley's assistant administrator, and Mary Ann Bennett, chief nursing officer, explain that the hospital has a very low census, averaging about 30 patients, which drives up average costs, and many patients have psychiatric illness and are homeless, and require more expensive services.
A look at the CMS spreadsheet also shows that East Valley has extremely high 30-day post discharge costs going for skilled nursing care, $12,317, about four times higher than the California and national averages.
Nate Kaufman, a San Diego based hospital consultant, says that like it or not, getting paid based on episode of care efficiency is today's reality.
"Just like when we had five core [process of care] quality measures, that was a signal that we'd soon have 100, so you better get your act together on quality and processes," Kaufman says.
"And this too, is like a signal. CMS is saying sooner or later, there's going to be some significant penalties based on how the delivery system performs for Medicare patients, pre, and post hospital admission. And you need to get your act together."
Kaufman adds that the pressure is on hospitals to get their physicians in line. Hospitals that are integrated, or have accountable care-style management over their post-discharge services should do well on the efficiency measure.
"The accountable care organizations and the fully integrated healthcare systems shouldn't have a problem, (with efficiency scores) but those markets where physicians consider themselves autonomous, and [where] their hospitals are interfering with the practice of medicine, and [where they] have their 'own way of doing things' are going to get penalized," he says. "The government's position seems to be not to penalize the physicians directly, but to force the hospitals to penalize them."
DiLisi adds that a weight of 20% in the VBP algorithm affecting 1.5% to 2% of a hospital's Medicare payment may not seem like much. "And Medicare could get everybody's attention by making this measure worth even more."
But even 20% of 2% is important, DiLisi says. "You're talking about an industry that is not dealing with 20% margins. In general we're dealing with single digits.
"And by 2017, you'll have 6% of your revenue at risk for Medicare reductions, and that's real cash in the grand scheme. Most hospitals are going to pay attention to that."