iProtean—Medicare Payment Cuts Plus ACA Payment Reforms

The American Hospital Association urged Congress last week to avoid cuts to Medicare and Medicaid payments to hospitals as they negotiate debt reductions.  Much is at stake here—the 2% fiscal cliff cuts (“sequestration”) to Medicare providers as well as additional cuts that may affect hospitals and physicians; for example, offsetting the “doc” fix by shifting this reduction in physician payment to hospitals and other providers, and the expiration of some Medicare provisions at the end of the year. (Health Lawyers Weekly, AHLA ,December 7, 2012)


AHA also noted its concern about “the use of hospitals provisions as part of a ‘down payment’ in a debt reduction plan.”  It asked Congress to protect payments to Graduate Medical Education, long-term care hospitals, inpatient rehabilitation facilities, and rural and critical access hospitals from “harmful cuts.”


These potential cuts, when combined with the payment reforms under the Affordable Care Act, would mean “longer wait times for care; fewer doctors, nurses and other caregivers; and less patient access to the latest treatments and technology,” AHA said.  (AHA Letter to Congress, December 4, 2012)


Nate Kaufman of Kaufman Strategic Advisors notes in the upcoming iProtean advanced course Value-Based Purchasing and Accountable Care Organizations that the value-based purchasing provision of the Affordable Care Act and other performance-based measures could put hospitals at risk for Medicare payments: “Up to eight percent of a hospital’s Medicare revenue will be contingent on performance on the value-based purchasing standards, the readmission standards and the hospital-acquired condition standards.  No hospital could survive losing eight percent of its Medicare revenue.”


In the course, Dan Grauman says that an obvious negative effect of value-based purchasing occurs when hospitals are not focused on improving performance. They “could do poorly and suffer financially just by getting . .  less on their Medicare payments.”


“The way I describe the Medicare reimbursement system for the next five years is we are in a fee-for-service system with value-based penalties.  So it’s critical that if you want to get your full payment from Medicare, even though that payment rate isn’t particularly great, you make sure you optimize your performance in value-based purchasing,” Mr. Kaufman said.


In Value-Based Purchasing and Accountable Care Organizations, Dan Grauman, Nate Kaufman and Monte Dube provide background information on value-based purchasing and accountable care organizations, and offer suggestions about how to perform successfully under these provisions of the Affordable Care Act.  iProtean subscribers, this new course will appear in your course library soon!  We will send you a notice of publication.


Notice:  iProtean Connect will be on holiday from December 24 through January 9, 2013.  We hope everyone has a wonderful holiday season!



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iProtean—Value-Based Purchasing and Cost

The recent study on value-based purchasing compared projected total performance scores (as defined by CMS as part of value-based purchasing) with Medicare cost report data for corresponding measurement periods.  The results of the study suggest that higher routine costs per day result in the highest level of quality.  When evaluating the cost of patient experience/satisfaction, another component of value-based purchasing, the analysis showed similar results. (W. Shoemaker, “The Cost of Quality: How VBP scores Correlate with Hospital Costs,” hfm, December 2012)


The clinical (quality measure) costs used in the study focused on what are typically thought of as “room and board” and nursing services.  William Shoemaker, the study’s author, noted that the value-based purchasing total performance score measurements provided a means to test “whether quality is free or whether it is the result of investing resources in routine patient care.”


Higher operating costs among hospitals that achieve higher levels of quality as measured by value-based purchasing performance scores “present a paradox for hospitals,” Mr. Shoemaker wrote.  Value-based purchasing is intended to encourage higher quality by putting hospitals at financial risk for quality.  Consequently, hospitals should focus on the quality/cost relationship as they seek to meet or exceed quality measures set forth by CMS through the value-based purchasing program.


Another aspect of this study used a state-by-state analysis of projected total performance scores for urban hospitals compared with rural hospitals under the value-based purchasing program.  Study results suggest that while the total performance scores for the two groups are similar, rural facilities tend to score higher on the patient experience/satisfaction measures, but urban hospitals score higher on clinical process measures.


These data are preliminary and not the actual figures CMS will measure during the first year of the value-based purchasing program.  If used as an approximation of actual results, however, hospitals may want to use such data to evaluate their own performance compared with that of their peers, and plan accordingly. (“Urban versus Rural Performance by State Under Value-Based Purchasing,” hfm, 12/3/2012)


In the upcoming iProtean advance course, Value-Based Purchasing and Accountable Care Organizations, Dan Grauman (DGA Partners) and Nate Kaufman (Kaufman Strategic Advisors) discuss both the positive and negative effects of value-based purchasing and offer suggestions on how to put steps in place to perform well under the program.



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iProtean—Increase in Hospital-Employed Physicians

Guest Submission:  Barry Bader, Bader & Associates


Physician participation on hospital boards has been a widely recommended practice for several decades—a way to strengthen hospital-medical staff relationships and build the board’s competency in clinical matters.  Surveys generally show that 15% to 25% of the typical hospital board is composed of physicians, often including the elected president of the medical staff as an ex officio board member.


Despite the unquestioned value and commitment many physician trustees bring, the inclusion of active medical staff members has become more problematic for several reasons.  Employed physicians are becoming a substantial proportion—often a majority—of the active staff.  Having hospital employees other than the CEO (who reports directly to the board) serve as a voting board member is generally not advisable.


What’s more, the Internal Revenue Service requires that more than half of a hospital board with fiduciary responsibility be independent members.  Only independent members should serve on the audit and executive committees, and neither employed nor contracted physicians pass these thresholds.  Compounding the conundrum, if one or more medical staff officers is an ex officio trustee with vote, it’s possible that an independent physician who competes with the hospital or doesn’t share its goals could wind up as a trustee—hardly a desirable situation.


There are no easy or one-size-fits-all answers to the problem.  But some fresh thinking appears in the upcoming iProtean course, Physicians & Governance.  The course features Lisa Goldstein from Moody’s Investors Service, Monte Dube, Esq. from Proskauer and me discussing our views on the new landscape for physician members on hospital boards—the traditional roles physicians have played as hospital trustees and why board service for physicians has become more of a challenge.


We review the competencies boards should seek in selecting physicians to serve on hospital boards, common mistakes hospitals and medical staffs make when changing selection methods, and emerging best practices related to physician board membership.


Increasingly, boards and medical staffs will come to recognize that “voting physician seats” on the board are not where the action is anymore to influence patient care in a positive way.  Rather, as hospitals transform into integrated care systems with aligned medical staffs that are accountable for their costs and quality, the most important venue for physician engagement in organizational leadership and decision making will be in a clinical leadership infrastructure, not the governing board.


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iProtean will release Physicians & Governance early in 2013. Barry has also written on this topic in Great Boards and the article is now available at www.greatboards.org.


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