Dec 20, 2012

Tying Medicare Payment to Quality

Patrick Conway, M.D., M.Sc.
CMS Chief Medical Officer and Director of the Center for Clinical Standards and Quality

In mid-December, the Centers for Medicare & Medicaid Services (CMS) posted one of the most important steps we’ve taken yet for Medicare reform.

Go to and you’ll find a chart labeled FY 2013 HVBP Payment Adjustment Factors with provider numbers and percentages.  This chart is the latest sign of how serious Medicare is when it comes to making sure its beneficiaries get the best quality care. 

The Hospital Value-Based Purchasing Program is one of a host of Affordable Care Act programs that put patients at the center of the Medicare system.  We’ve known for a long time that when Medicare paid providers based on how much work they did and not on how well they did for patients, too often patients got services and tests that didn’t improve their health.  Providers already must publicly report the steps they take to provide quality care to Medicare beneficiaries; Hospital Value-Based Purchasing gives these efforts additional teeth. 

Beginning in 2013, Medicare will start paying hospitals a little more or a little less in each payment depending on how well they meet Medicare’s quality standards.  The value-based payment adjustment factors tell them how much their base Medicare payments will change.

Hospitals are graded on improvement as well as performance on a variety of quality measures. These standards are consistent with clinical practice for the provision of high quality care.  Did emergency room staff follow the right protocols with a heart-attack patient? Did a patient get antibiotics before surgery?  Did your nurses and doctors listen to you?

Hospital Value-Based Purchasing is a carefully crafted program.  It’s built on the same recommendations that private purchasers of health care and the Institute of Medicine have recommended and tested for a decade or more.  It does not add to the deficit.  One percent of the base Medicare payment for each Medicare patient discharged from an eligible hospital funds the FY 2013 program.  CMS consulted with a wide range of stakeholders—from hospitals to patient advocates—every step of the way.

CMS reviewed nine months of data from July 1, 2011, to March 30, 2012 measure both performance and improvement in the first year of the program.  We published our initial calculations in April, gave hospitals updated calculations in October, and posted these final adjustment factors only after the hospitals had a chance to review them.  And, only 15 hospitals out of almost 3,000 asked us to review our calculations.

If you go to the chart, you’ll see the base payment adjustments that Medicare will be making for every single discharge from an eligible hospital, depending on the quality of care the hospital provided.  This demonstrates Medicare’s commitment to ensuring that its beneficiaries get the best quality care.

In the next few years, as payment incentives gradually increase and more quality measures are added to the program, we will continue working with hospitals to make sure Medicare beneficiaries’ quality of care improves.  The Hospital Value-Based Purchasing program is off to a strong start.  Posting the value-based payment adjustment factors may seem like a routine step, but it actually heralds a new era in which Medicare actively promotes the best care for beneficiaries and makes their health priority #1.