Immediate Jeopardy at Parkland Puts VBP Incentive Pay in Peril

The possibility that Parkland Memorial Hospital could lose $417 million in federal pay stemming from last month's "immediate jeopardy" declaration for shameful quality problems uncovered by state and federal surveyors sounds draconian.

But frankly, such harsh punishment is unlikely, given the fact that Parkland is a 140-year-old safety net facility with national historic significance. Such a decision would surely shut the hospital down, and Dallas couldn't withstand that. The Centers for Medicare & Medicaid Services will work very hard with Parkland to get these problems fixed, I'm sure.

Additionally, CMS officials tell me their 344-page federal report documenting Parkland's problems is, in part, the result of a concerted effort to be more assertive as they investigate complaints. I'll explain more about that shortly.

But there's another consequence lurking with a much more realistic impact on Parkland's revenue, one that as yet has not been the topic of much open discussion.

The hospital to which the assassinated President John F. Kennedy was rushed in 1963 could well be the first major acute care facility in the nation prohibited from receiving millions in incentive payments under a key provision of the Affordable Care Act.

Under that rule, called the Hospital Inpatient Value-Based Purchasing program, roughly 3,000 hospitals in the nation will see their Medicare payments reduced by 1% in fiscal 2013, and more in later years.

Those funds, an estimated $850 million in the first year, are to be set aside for redistribution to hospitals that provide better care, as measured by such indicators as patient experience scores and timely administration of medications.

In other words, hospitals will be competing with each other for a bigger share. The game is on, as the performance competition began July 1 and will end March 31, 2012.

Don McLeod, a spokesman for the Centers for Medicare & Medicaid Services, told me that hospitals that do better than others will receive payments between .0236% for the lowest scoring hospitals to 1.817% for those scoring the highest.

But here's the rub: According to language in the ACA and in the VBP rules, hospitals that have received a federal declaration of immediate jeopardy don't get to play ball. 

Medicare will still withhold that 1% of their federal diagnostic related group (DRG) payments. But it looks like Parkland would be locked out of any opportunity to earn any portion of that pool back.

And lest Parkland be all by itself with this distinction, Methodist Dallas Medical Center, another important healthcare institution five miles away, is in the same boat, having received its own federal sanction from CMS for causing immediate jeopardy just a few weeks after Parkland did.

CMS spokeswoman Ellen Griffith Cohen cautioned in an e-mail that the agency "has not announced the names of any hospitals that will or will not be eligible for hospital VBP incentive payments," adding that CMS is "evaluating the application of the definition of immediate jeopardy in the hospital VBP context."

Here's the precise language of the rule:

"These incentive payments will be funded for FY 2013 through a reduction to FY 2013 base operating DRG payments for each discharge of 1.0 percent, as required by section 1886(o)(7). Section 1886(o)(1)(C) provides that the Hospital VBP program applies to subsection (d) hospitals (as defined in section 1886(d)(1)(B)), but excludes from the definition of the term “hospital,” with respect to a fiscal year: (1) a hospital that is subject to the payment reduction under section 1886(b)(3)(B)(viii)(I) for such fiscal year; (2) a hospital for which, during the CMS-3239-F 16 performance period for the fiscal year, the Secretary cited deficiencies that pose immediate jeopardy to the health and safety of patients..."

Another part of CMS' final rule says this: "We proposed to interpret this provision to mean that any hospital that is cited by CMS through the Medicare State Survey and Certification process for deficiencies during the performance period (for purposes of the FY 2013 Hospital VBP program,
the performance period is July 1, 2011-March 31, 2012) that pose immediate jeopardy to patients will be excluded from the Hospital VBP program for the fiscal year."

I mentioned earlier that CMS is being more aggressive in looking for hospital immediate jeopardies. David R. Wright, CMS Acting Deputy Administrator for Region 6, which covers Arkansas, Louisiana, New Mexico, Oklahoma, and Texas, told me last week that for the fiscal year that concludes at the end of this month, CMS has issued six of these immediate jeopardies. Three of them, Parkland, Methodist, and Humble Surgical Hospital, in Humble, Texas, occurred after July 1, 2011.

That's an increase from two issued in the prior fiscal year, and when I asked why, Wright explained that CMS this year directed surveyors investigating complaints to not just review patient records when they visit the hospital, but to instead "walk the halls" and focus on "things that are directly observable."

"We've been pushing for surveyors to do more observations, and be out there and observe more – for example the infection control findings (at Parkland) were the result of direct observation, as were the findings regarding (problems with Parkland's) emergency services. It's true that they've always done this, but we're asking them to really focus on this a lot more."

It's plausible, and justifiable, that CMS take a tougher stance on hospitals that distinguish themselves with systemic quality gaps. If the other nine CMS administrative regions in the country are following this policy, perhaps we'll soon see an increasing number of these embarrassing reports nationally.

I tried to find out from CMS' Washington office, and CMS' other nine regional offices, what those numbers look like, and how many immediate jeopardies had been declared in recent years. Is there a trend, I wonder, that increases the stakes to improve and may push more hospitals out of the competition for federal payment?

But no one from other regional offices, except Region 6, answered that question before my deadline.

CMS spokeswoman Cohen in the Washington office reiterated what she told me in March: CMS doesn't have that information, although it has recently begun to track it.

In any case, hospitals should be on notice now, if they haven't been already. They may very well be locked out of the ballpark in rough and tumble competition for that $850 million. The federal definition of immediate jeopardy is extremely broad. A hospital doesn't even have to cause harm to get this designation, just allow an environment that makes it more likely to occur.

Here's one good thing about all this: It could raise quality all around.

And here's another: After CMS excludes hospitals that jeopardize patient care to this extent, there'll be more of that $850 million for everybody else.