HCA Holdings 2011 Annual Report Download - page 32

gains over the preceding 10 years. To determine the projection, HHS uses the BLS 10-year moving average of
changes in specified economy-wide productivity (the BLS data is typically a few years old). The Health Reform
Law does not contain guidelines for HHS to use in projecting the productivity figure. For federal fiscal year
2012, CMS has announced a negative 1.0% productivity adjustment to the market basket. CMS estimates that the
combined market basket and productivity adjustments will reduce Medicare payments under the inpatient PPS by
$112.6 billion from 2010 to 2019.
The third type of reduction is in connection with the value-based purchasing program discussed in more
detail below. Beginning in federal fiscal year 2013, CMS will reduce the inpatient PPS payment amount for all
discharges by the following: 1% for 2013; 1.25% for 2014; 1.5% for 2015; 1.75% for 2016; and 2% for 2017 and
subsequent years. For each federal fiscal year, the total amount collected from these reductions will be pooled
and used to fund payments to hospitals that satisfy certain quality metrics. While some or all of these reductions
may be recovered if a hospital satisfies these quality metrics, the recovery amounts may be delayed.
If the aggregate of the three market basket reductions described above is more than the annual market basket
adjustments made to account for inflation, there will be a reduction in the MS-DRG rates paid to hospitals. For
example, for the federal fiscal year 2011 hospital inpatient PPS, the market basket increase to account for
inflation was 2.6% and the aggregate reduction due to the Health Reform Law and the documentation and coding
adjustment was 3.15%. Thus, the rates paid to a hospital for inpatient services in federal fiscal year 2011 were
0.55% less than rates paid for the same services in the prior year.
Quality-Based Payment Adjustments and Reductions for Inpatient Services. The Health Reform Law
establishes or expands three provisions to promote value-based purchasing and to link payments to quality and
efficiency. First, in federal fiscal year 2013, HHS is directed to implement a value-based purchasing program for
inpatient hospital services. This program will reward hospitals that meet certain quality performance standards
established by HHS. The Health Reform Law provides HHS considerable discretion over the value-based
purchasing program. On April 29, 2011, CMS issued a final rule establishing the value-based purchasing
program for hospital inpatient services. Under this final rule, CMS states that it estimates it will distribute $850
million in federal fiscal year 2013 to hospitals based on their overall performance on a set of quality measures
that have been linked to improved clinical processes of care and patient satisfaction. For payments in federal
fiscal year 2013, hospitals will be scored based on a weighted average of patient experience scores using the
Hospital Consumer Assessment of Healthcare Providers and Systems survey and 12 clinical process-of-care
measures. CMS will score each hospital based on achievement (relative to other hospitals) and improvement
ranges (relative to the hospital’s own past performance) for each applicable measure. Because the Health Reform
Law provides that the pool will be fully distributed, hospitals that meet or exceed the quality performance
standards set by HHS will receive greater reimbursement under the value-based purchasing program than they
would have otherwise. Hospitals that do not achieve the necessary quality performance will receive reduced
Medicare inpatient hospital payments. CMS will notify each hospital of the amount of its value-based incentive
payment for fiscal year 2013 discharges on November 1, 2012.
Second, beginning in federal fiscal year 2013, inpatient payments will be reduced if a hospital experiences
“excessive readmissions” within the 30-day period from the date of discharge for heart attack, heart failure,
pneumonia or other conditions that may be designated by CMS. Hospitals with what CMS defines as “excessive
readmissions” for these conditions will receive reduced payments for all inpatient discharges, not just discharges
relating to the conditions subject to the excessive readmission standard. Each hospital’s performance will be
publicly reported by CMS. On August 1, 2011, CMS issued a final rule implementing portions of this program
but indicated that it will issue in future rulemakings additional policies with respect to excessive readmissions,
including the specific payment adjustment methodology.
Third, reimbursement will be reduced based on a facility’s HAC rates. An HAC is a condition that is
acquired by a patient while admitted as an inpatient in a hospital, such as a surgical site infection. Beginning in
federal fiscal year 2015, the 25% of hospitals with the worst national risk-adjusted HAC rates in the previous
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