The Implications of Value Based Purchasing in the American Healthcare System
The Implications of Value-Based Purchasing in the American Healthcare System
As a result of the Patient Protection and Affordable Care Act of 2010, beginning in October 2012, US hospitals will begin having their payments from Medicare affected by the Hospital Value-Based Purchasing Program. Essentially, this legislation will shift the way hospitals are reimbursed for services from a focus on quantity to a focus on quality. The following research study will examine the background of this legislation, how it is structured, and the pros and cons of this reform.
Currently, hospitals are paid a flat fee per hospital case by the federal Medicare program, using the Inpatient Prospective Payment System (IPPS). The prospective payment price, also referred to as the DRG (Diagnosis Related Groups) payment, covers all hospital costs for treating the patient during a specific inpatient stay, including the costs of all devices that are used. CMS adjusts DRG payments annually to reflect changes in hospital costs and changes in technology. This fee is paid to the hospital based on the patient’s symptoms, age, sex, discharge status, and the presence of complications, but does not account for length of stay or how many hospital services are actually used. (Ellis, 2011) Over time, the attempt has been to keep these rates close to the average cost of providing the services per case, although many hospitals claim that often the case payments they receive are below their own full costs. (Reinhardt, 2009)
In October 2012, the Centers for Medicare and Medicaid Services (CMS) is implementing the Hospital Value-Based Purchasing (VBP) Program. This initiative will reward acute-care hospitals with incentive payments for the quality of care they provide to people with Medicare. This means that DRGs are still in place, but incentives can be reached based on how well the hospital performs on certain quality measures, or how much the hospital’s performance improves compared to its
As a result of the Patient Protection and Affordable Care Act of 2010, beginning in October 2012, US hospitals will begin having their payments from Medicare affected by the Hospital Value-Based Purchasing Program. Essentially, this legislation will shift the way hospitals are reimbursed for services from a focus on quantity to a focus on quality. The following research study will examine the background of this legislation, how it is structured, and the pros and cons of this reform.
Currently, hospitals are paid a flat fee per hospital case by the federal Medicare program, using the Inpatient Prospective Payment System (IPPS). The prospective payment price, also referred to as the DRG (Diagnosis Related Groups) payment, covers all hospital costs for treating the patient during a specific inpatient stay, including the costs of all devices that are used. CMS adjusts DRG payments annually to reflect changes in hospital costs and changes in technology. This fee is paid to the hospital based on the patient’s symptoms, age, sex, discharge status, and the presence of complications, but does not account for length of stay or how many hospital services are actually used. (Ellis, 2011) Over time, the attempt has been to keep these rates close to the average cost of providing the services per case, although many hospitals claim that often the case payments they receive are below their own full costs. (Reinhardt, 2009)
In October 2012, the Centers for Medicare and Medicaid Services (CMS) is implementing the Hospital Value-Based Purchasing (VBP) Program. This initiative will reward acute-care hospitals with incentive payments for the quality of care they provide to people with Medicare. This means that DRGs are still in place, but incentives can be reached based on how well the hospital performs on certain quality measures, or how much the hospital’s performance improves compared to its
References: Reinhardt, U. (2009, January 23). http://economix.blogs.nytimes.com/2009/01/23/how-do-hospitals-get-paid-a-primer/. The New York Times. Retrieved from http://economix.blogs.nytimes.com/2009/01/23/how-do-hospitals-get-paid-a-primer (accessed May 2, 2012). Premier. (2012). Model hospital value-based purchasing program improved patient outcomes. Retrieved from https://www.premierinc.com/quality-safety/tools-services/p4p/hqi/index.jsp (accessed May 12, 2012). Kaiser Family Foundation. (2011, April 19). Summary of new health reform law. Retrieved from http://www.kff.org/healthreform/upload/8061.pdf (accessed May 22, 2012). CMS. (2012, June 7). Hospital value-based purchasing . Retrieved from https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html (accessed June 12, 2012). Saint Louis, C. (2012, April 30). E.R. doctors face quandary on painkillers. The New York Times. Retrieved from http://www.nytimes.com/2012/05/01/health/emergency-room-doctors-dental-patients-and-drugs.html?_r=2 Freeman, J UC Atlas of Global Inequality. (2011). Health care spending . Retrieved from http://ucatlas.ucsc.edu/spend.php Casalino, L., Elster, A., Eisenberg, A., Lewis, E., Montgomery, J., & Ramos, D Kouyoumdjian-Gurunlian, S. (2012, 04). What valued based purchasing will mean for the healthcare industry. Presentation delivered at National Healthcare CNO Summit spring 2012, Hollywood, FL. NBCH