First announced in 2011, the Value Based Purchasing (VBP) Program represented major change for healthcare providers. And since CMS implemented the program in fiscal year 2013, hospitals have faced a strong imperative to adapt their operations to focus on measurable aspects of high-quality care, instead of volume of services.
Challenges in a pay-for-performance market
Many medical facilities struggle to realize stable, long-term performance in light of VBP guidelines, which reward positive quality metrics with bonuses and penalize facilities that show poor quality care with fines and assessments.
Approximately 26% of patients are currently in value-based programs. But it is expected that this number will double to 52% by 2020, according to a recent survey. This means providers will be getting more of their revenue from value-based programs. Presently however, only 54% of hospitals have qualified for a bonus under the program's rules. Additionally, hospitals omitting one of the four data categories in their VBP reporting performed significantly better than those that reported all four. This performance gap is a growing concern for providers, especially as VBP goals change from year to year. Facing a moving target and with a large gap in the way of improved results, how can hospitals create better outcomes?
While the initial reaction might be to blame internal processes and work on improving them, for the most part the fix is more subtle. The problem for many providers isn’t their efficacy, inefficiency, or provision of care. The problem is that they haven’t developed the right approach to reporting. This in turn creates a divide between day-to-day performance and the metrics recorded and shared with CMS. Without an effective strategy to prepare for and track reporting requirements, providers sell themselves short in their VBP reporting. This leads to financial and reputational issues, both of which can become quite serious.
A growing and troubling trend
Increasingly, healthcare providers have been underperforming in terms of earning CMS bonuses in the years since VBP was first introduced. As reported by CMS, 1,600 hospitals received a bonus in 2017—that's about 200 fewer than the total number of qualifying hospitals in 2016. An 11% decrease is significant, but belies the ambiguity at the heart of the program: even if a facility hits all target requirements, it may show only fair performance if many other providers meet similar goals.
How can hospitals stay on top of regularly changing targets and metrics while still accurately documenting and reporting on the high levels of care and performance commonly seen in their facilities? Predictive analytics can act as a powerful ally for healthcare providers, helping them prioritize focus and data collection before action needs to be taken—giving involved stakeholders an enhanced focus and sense of purpose. More broadly, proactive strategizing plays a similar role in helping hospitals receive better returns from their participation in the VBP program.
The power of predictive analytics and effective strategies
Predictive analytics offers a useful and versatile platform for understanding more about operations and contextualizing both general performance and specific needs related to VBP reporting. By deriving effective analysis that guides staff before deadlines approach, hospitals can more confidently choose how, when, where and why to allocate resources, both for providing care and for reporting on requirements.
With the CMS posting their "test questions"—the measurements of success that they plan to use— years in advance, hospitals have a powerful baseline from which to start employing predictive analytics. Strategizing now means avoiding potentially exponential increases in penalties in the future.
Understanding exponential impact
The VBP formulary for hospital buy-in and payout includes a complex combination of payments, or buy-in, and reward milestones over the prescribed performance/achievement years. In order for hospitals to participate in the Hospital Inpatient Value-Based Purchasing Program, they must first buy in to the risk pool by accepting a standard reduction on all Medicare payments during each fiscal year.
Once bought-in, hospitals are incentivized to recover their buy-in and potentially earn additional payment rewards as a result of overall VBP scoring in each performance/achievement year. In addition to the initial reduction, payment adjustments based on hospital performance are also made on a claim-by-claim basis—and hospitals can use this approach to determine whether they are recouping their initial buy-in. Then, in order to estimate the annual impact of the VBP adjustments, the product of the Medicare Case-Mix-Index, total Medicare discharges, and net operating DRG adjustment can be calculated.
If a hospital realizes an annual impact of several million dollars in payment reductions, this would certainly justify the investment of time and resources needed to develop a proactive and predictive analytics program centered on managing VBP performance. With the right application, predictive analytics and forward-facing strategy, healthcare facilities can more deftly avoid penalties, improve reporting on performance and reap the rewards the program is meant to foster.
John Marchisin is a managing director and John Mollica is a manager in the healthcare practice of AArete, a global consultancy specializing in data-informed performance improvement. They can be reached respectively at [email protected] and [email protected].