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Hospital medicine and health care reform

March 2011

Published in the March 2011 issue of Today’s Hospitalist

ARE THE PAYMENT CHANGES mandated by last year’s health care reform legislation good or bad news for hospitalists? According to the panelists of a recent Society of Hospital Medicine (SHM) Webinar, the new law could mean big opportunities for hospital medicine.

While insurance requirements included in the Affordable Care Act (ACA) are being challenged in court, many of the law’s provisions dealing with health care delivery and reimbursement were developed before the new legislation was passed. “We don’t think those provisions will be affected by any movement toward repeal,” explained panelist Patrick Torcson, MD, MMM, director of the hospitalist program at St. Tammany Parish Hospital in Covington, La., and chair of SHM’s performance standards committee.

But because the law is ushering in complex changes to how health care is delivered and paid for, it is sure to pose challenges to both hospitals and physicians. Here’s an overview of what hospitalists can expect.

Going negative
For one, the law modifies and expands a reporting program that many physicians have some experience with.

The Physician Quality Reporting Initiative (PQRI) gets a new name and acronym as it changes to the Physician Quality Reporting System (PQRS). Since 2007, Medicare has paid bonuses to physicians who report data for at least three performance measures on at least 80% of all patients covered by those measures.

Under the new law, physicians who voluntarily report those data will receive a 1% bonus in 2011 and a 0.5% bonus between fiscal years 2012 and 2014. But that ends in 2015, when the PQRS goes negative. According to Dr. Torcson, physicians who still choose to not participate will be hit with a 1.5% penalty adjustment on their total allowable Medicare charges. (The penalty jumps to negative 2% in 2016.)

Dr. Torcson admitted that hospital medicine has had some issues with the PQRI (now known as the PQRS).

Because so few of the measures in the program pertain to hospital medicine, some hospitalists haven’t bothered to participate. And relevance to hospital medicine may continue to be a problem: While the new PQRS program plans to feature a set of performance measures for each of the 39 different specialties that Medicare recognizes, hospital medicine isn’t on that list.

For now, hospitalists are expected to report on the relatively few inpatient measures that are part of the program. By 2015, hospitalists who don’t report those data, could be dinged as much as $2,800 in Medicare reimbursement.

There is some good news, however. To make it easier to participate in the PQRS, the new law allows physicians to report on 50% of eligible cases, not 80%. The law also throws a bone to physicians participating in a recertification program. If those physicians also self-report data through PQRS, they’ll be eligible for an additional 0.5% of their total allowable Medicare charges. And yes, Dr. Torcson said, participating in focused practice in hospital medicine recertification through the ABIM would count.

Modifying physician payments
Data from PQRS may play an even bigger role in physician reimbursement because of another provision in the new law. The legislation requires Medicare to develop a payment modifier to the physician payment formula, which Dr. Torcson said, is “one of the most important parts of the new law that we’ve not heard much about.”

While many details about the modifier are still up in the air, it will be used to adjust individual physician payments based on information about physicians’ cost per case and quality performance. Some of those data will come from information that physicians self-report to PQRS; other data will come from a physician feedback program “now called the Physician Quality and Resource Use Report “that began in 2008.

That program uses software to comb through physicians’ claims data and report back to doctors on their resource use per case. Under the legislation, all physicians will eventually receive these reports.

Using data from these two sources, Medicare plans to place all physicians “both outpatient and inpatient ” into one of four categories: high cost/high quality, low cost/high quality, high cost/low quality and low cost/low quality. Physicians who land in either the high cost/low quality or low cost/low quality category can expect to have their Medicare reimbursement adjusted downward.

“This could have a very significant impact on individual physician reimbursement,” Dr. Torcson said. The CMS is still deciding which quality and cost measures it will include and should announce that decision in 2012. The CMS will then roll out the modifier in specific markets in January 2015 and apply the modifier to all payments of physicians who participate in Medicare in January 2017.

Changes in store for hospitals: bundling
Under the new law, one of the hottest topics in hospital medicine “bundled payments “looks like a “maybe” in terms of nationwide implementation. The ACA established a national pilot program in payment bundling that will kick off Jan. 1, 2013, and last three years. Depending on pilot results, the program could be expanded in 2016. It will cover 10 conditions that will include chronic, acute, surgical and medical issues.

Panelist Patrick Conway, MD, MSc, a pediatric hospitalist who’s the director of hospital medicine at Cincinnati Children’s Hospital and chair of SHM’s public policy committee, explained what bundled payments might look like.

“Bundling may be applied to a specific episode of care, such as a joint replacement or acute pneumonia,” he said, “or for a unit of time for a chronic condition, such as managing heart failure for a year.” Episodes of care may be defined as lasting from three days before a surgery or hospitalization to 30 days after.

Given the commanding role that hospitalists play in care coordination, Dr. Conway said that bundled payments ” if they become widespread “could be a major opportunity for hospitalists. He urged hospitalists to start working now to boost the skills and resources they need to improve patient care beyond discharge.

Panelist Ronald Greeno, MD, co-founder and chief medical officer of Cogent Healthcare, a national hospitalist management and consulting company based in Brentwood, Tenn., pointed out that Medicare is not going to decide how bundled payments get divided locally. “The ability of any hospitalist group to justify the value they create for the broader organization will determine what percentage of those dollars they get,” Dr. Greeno said.

Value-based purchasing
There’s nothing provisional about the advent of value-based purchasing for hospitals. Under the health care reform law, this program will affect hospitals’ Medicare payments for discharges, based on how well hospitals meet performance measures.

Medicare will use the same core measures that hospitals have been reporting for years. But while Medicare has been paying hospitals for simply reporting data, it will soon use those data to financially reward or penalize facilities for their performance. The program is scheduled to take effect in October 2012. Critical access facilities will be exempt.

Under the new law, Medicare will tally hospitals’ performance scores on all the individual measures. Hospitals will earn points when they meet a certain score or improve on a past score, and those points will be weighted for a total performance score.

Hospitals that do well on their total performance score will receive a bonus in the form of a percentage of their overall Medicare payments. (Dr. Torcson pointed out, however, that the hospital value-based purchasing program is supposed to be budget neutral. Funding for those bonuses will come from initially reducing a hospital’s DRG payments for the year.)

“The payment differential will apply to all discharges, not just discharges targeted in individual measures,” Dr. Conway stressed. “This is a huge opportunity for hospitalist groups to contribute value to their hospital.”

Hospitalists should expect their CEOs to be looking to them to help them maximize their scores “and to help them avoid being penalized for less than optimal performance. “Value-based purchasing can become the new business case for hospital medicine, like length of stay was in the 1990s,” said Dr. Torcson. Because so many hospitalist programs tie physician incentives to core-measure performance, success with value-based purchasing could translate into more or fewer dollars for individual doctors as well.

Accountable care organizations
The new law is also helping create a new health care entity: accountable care organizations (ACOs).

ACOs are alliances formed by qualifying providers, which can include hospitals, group practices, individual practices, and partnerships between hospitals and other health care professionals. The reform law requires ACOs to have a legal structure, to serve at least 5,000 patient beneficiaries, and to have enough primary care physicians to treat those patients. Each ACO must also commit to sticking with that professional partnership for at least three years.

While ACOs will debut in January 2012, many questions are still unanswered. What quality benchmarks will alliances need to reach to qualify as ACOs, for instance, and what skills will organizations need to thrive?

Dr. Greeno said that hospitalists who want to take leadership roles in ACOs need to know that “the bar is going to be set higher, and the need to integrate with other hospital departments and with upstream and downstream providers will be an imperative.”

But programs that have experience with full capitation know that such systems are “a great opportunity to figure out smarter ways to get better outcomes at lower cost,” Dr. Greeno added. ACOs “which some analysts are referring to as “managed care 2.0” “lend themselves “extremely well to the thinking that many hospitalist groups have developed in the last decade,” he said. “We need to be very active participants in how these programs get rolled out.”

Other payment changes, opportunities
In addition, several ACA provisions make it clear that hospitals need to tackle preventable readmission rates.

Beginning this year, Medicare is launching a pilot program on community-based care transitions for hospitals that have high readmission rates. “Under the program,” said Dr. Conway, “hospitals must engage in at least one evidence-based readmission transition intervention.”

The law also gives funding to the AHRQ to support quality improvement research to identify ways to lower readmission rates.

“This is an opportunity for hospitalists to garner federal funding for demonstration projects to reduce readmissions,” said panelist Mark Williams, MD, chief of the hospital medicine division at Chicago’s Northwestern University Feinberg School of Medicine and principal investigator of SHM’s Project BOOST. According to Dr. Williams, the government this month should be rolling out a program of demonstration projects designed to reduce readmissions as part of a patient safety initiative.

Then, in fiscal year 2013, the rubber meets the road. “Hospitals with higher than expected readmission rates will experience decreased payments for their Medicare discharges,” said Dr. Conway.

Still another ACA provision could have an even bigger impact on hospitals’ cash flow: Beginning in 2014, Medicare plans to reduce hospital payment updates. The goal, said Dr. Torcson, is to save Medicare $155 billion over a 10-year period.

To do so, the CMS will phase in (over five years) a negative 2% update for hospitals that fail to report on 46 performance measures. That negative incentive, Dr. Torcson pointed out, is being rolled out at the same time as the hospital value-based purchasing program is being phased in.

An impact on subsidies?
“This could reduce the revenue available for hospitals to invest in their hospital medicine programs,” Dr. Torcson said. But Dr. Greeno countered that he doesn’t see any significant reduction in hospital subsidies happening in the near future.

“There will be increased pressure on all of us to demonstrate value,” Dr. Greeno admitted. “But if physician payments decrease, which I think they will, more money will go to more integrated organizations, and dollars will be distributed within those organizations based on value.” The potential is there, he added, for hospitals to want to invest even more in hospitalist programs.

According to Dr. Conway, the major change resulting from the legislation “is that some hospitals see the value of their hospitalist program as churning through the highest volume at the lowest cost. That paradigm will shift to providing the highest quality care at the lowest cost.”

Dr. Greeno concurred. “These changes are truly an existential threat to hospitals,” he said, “so they really need a hospitalist program that can execute.”

Phyllis Maguire is Executive Editor of Today’s Hospitalist.

A starring role for Physician Compare

ONE OF THE MANY PROVISIONS in last year’s Affordable Care Act (ACA) gives a prominent role to Medicare’s Physician Compare Web site. During a recent Webinar on the potential impact of reform legislation on hospital medicine, Patrick Torcson, MD, MMM, chair of SHM’s performance standards committee, pointed out that the Physician Compare site “with pages for individual physicians “is already up and running.

For now, the site includes only bare-bones information, such as a physician’s name, specialty and medical school. Dr. Torcson said, however, that the new health care reform law, “spells out an ambitious agenda for posting quality, cost and performance data on this site.”

Starting in 2013, a host of data will be published for each physician. While Medicare has yet to specify exactly what data will be posted on the site, Dr. Torcson said that he expects to see information on physician performance and efficiency, average costs per case, and patient satisfaction scores.

Advocacy efforts are already under way to ensure that physicians’ sites will carry a “hospitalist” designation, not internal medicine or family medicine. SHM is also lobbying to allow hospitalists to post “quality data from their primary hospital instead of individual-level performance measures, which may or may not be relevant.”

Alphabet soup and ACA programs

IN ADDITION TO SIGNIFICANT CHANGES in how hospitals and physicians will be paid, last year’s Affordable Care Act (ACA) established several programs that hospitalists should be aware of and think of participating in.

  • Patient Centered Outcomes Research Institute. The ACA mandated the creation of a Medicare innovations center to test untried payment and delivery models to reduce program costs. Possible programs could target care transitions and patient safety. “Total funding is $10 billion, or $1 billion a year,” said Patrick Conway, MD, MSc, a pediatric hospitalist who chairs SHM’s public policy committee and was part of a panel that presented a recent Webinar on the impact of health care reform legislation on hospitalists. “It’s a significant investment.”
  • Patient-Centered Outcomes Research Institute (PCORI). America wades into comparative effectiveness research. This new private/public partnership will receive $500 million a year to fund pilot projects to find out “what works best in health care,” said Dr. Conway. “It’s important for hospitalists to consider participating in these projects so successful models can spread through Medicare and Medicaid.”
  • Health care technology. Most of the incentives now accelerating the adoption of information technology were included in the American Recovery and Reinvestment Act of 2009, not the ACA. “Hospital-based providers don’t qualify for the EHR incentive programs,” Dr. Conway said. Hospitals, however, can qualify for incentives “and in many facilities, hospitalists have taken the lead in helping their hospitals meet meaningful use criteria.