The financial impact of P4P has been significant and the difference between the best and worst hospital performers is substantial, data shows.
Health systems are faced with shrinking operational margins, tightened budgets, and evolving payment models as they transition from traditional fee for service payments to value-based care. Approximately 6% of Medicare payments are now tied to quality through three Pay for Performance (P4P) programs. Based on publicly available outcomes data from the Centers for Medicare and Medicaid Services (CMS) FY17, the financial impact of P4P has been significant and the difference between the best and worst hospital performers is substantial:
Pay for Performance: Outcomes ranged from penalties of $9 million to extra incentive payments in excess of $3 million
- Value-Based Purchasing (VBP): Penalties of $1.7 million to extra incentive payments of $3.7 million
- Readmission Reduction Program (RRP):Penalties up to $6 million
- Hospital Acquired Conditions Reductions Program(HAC):Penalties up to $4 million
With hospital payment variations of this magnitude, there are clearly winners and losers in the P4P programs.
The RRP and HAC Programs are designed to improve the quality of care and care transitions by penalizing low performers with decreased payments. The VBP Program is designed to improve the experience of care, improve clinical outcomes, and reduce costs by adjusting payments. Hospitals can be penalized or they may earn significant payment increases when their VBP measure performance exceeds the median of all hospitals. With the average VBP payment percentage around 36%, the VBP potential to earn is almost 3 times the revenue initially withheld!
What Makes a Winner?
The most successful hospitals in the P4P program are those who have invested in a strong analytics program which enables performance to be closely monitored and acted upon by experts. These programs ensure that the data is:
- Timely: Updated throughout the performance period
- Targeted: Focused to identify specific areas for improvement
- Tuned: Modeled to demonstrate performance sensitivity
Timely:
CMS provides performance reports, but they are distributed up to 9 months after the end of the performance period. This delay makes it far too late for hospitals to take corrective action. Effective analytics forecasts performance throughout the year using current data and projects the potential financial impact of each program. Data for P4P measures naturally lag, but performance can be monitored at least monthly with projections provided while there is still an opportunity to impact outcomes.
Targeted:
CMS performance reports provide aggregated data for the overall hospital making it difficult to identify specific areas of opportunity. In order to take meaningful corrective action, the hospital must have analytics that drill down into performance gaps by service line, physician, and nursing unit. Measure performance should also be directly tied to the financial outcomes with the penalty per miss and the payments earned per success clearly understood. Detailed attribution with the robust allocation of penalties enables an effective prioritization of performance improvement efforts and the identification of internal best practices.
Tuned:
The CMS methodology uses complex scoring with different measures weighted more heavily in each program. As a result, improvements in one measure can be much more significant than similar improvements in other measures. Advanced analytics must expose this performance sensitivity and allow the end user to model different scenarios including quantifying the impact of small changes. Analytics should also allow changes to the median rates and performance thresholds to understand the impact of national changes on hospital penalties.
Conclusion:
Investing in a well thought-out analytics strategy is a critical success factor to winning in the P4P game. Winning organizations recognize that an effective analytics strategy is about far more than technology. They also have a system of experts who embrace the information as their own, ensure it is meaningful, actionable, and share it often with the clinical stakeholders who can actually impact results. In addition, winning organizations typically have well-defined processes for improvement with senior management champions and well-defined governance structures in order to leverage performance data into the organization’s most strategic asset.
Advanced analytics capabilities do not happen overnight. They are developed during a focused journey to improve organizational insights into strategic areas of performance. With the magnitude of bottom line impact at risk with the P4P programs, it is never too soon to begin building a winning analytics strategy. Be amazed at the improvement power unleashed when timely, meaningful information is placed in the hands of clinicians. Your patients can receive better care and experience better outcomes while the financial return realized by winning the P4P game more than offsets your analytics investment.
Senior Business Advisor
RelayHeatlh