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January 23, 2017

See your hospital's 2017 pay-for-performance penalty or bonus

Daily Briefing

Over the past few months, CMS released the final FY 2017 adjustments for the Readmissions Reduction Program, the Value-Based Purchasing Program (VBP), and the Hospital-Acquired Conditions Program (HAC). You can see how hospitals around the nation performed in our updated pay-for-performance penalty impact map below.

We spoke with Eric Fontana, a managing director with Advisory Board's Financial Leadership Council, about the key takeaways.

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Question: Overall, how did hospitals fare in FY 2017?

Eric Fontana:  We're seeing roughly the same percentage of hospitals receive a net pay-for-performance penalty in FY 2017 as in FY 2016: 69 percent of participating hospitals are receiving a net penalty this year, slightly up from 68 percent in FY 2016. Twenty-five percent of hospitals are receiving a positive adjustment, and 6 percent are breaking even.

For FY 2017, up to 6 percent of a participating hospital's revenue is at risk through the pay-for-performance programs. According to our calculations, the largest net penalty for a single organization is 4.15 percent; that's for a hospital that received a penalty in all three programs. The largest positive adjustment is 3.44 percent, for a hospital that received an incentive payment under the VBP and avoided penalties under the HAC and readmissions programs.

When we're considering individual programs, we should note that the readmissions program includes a new condition, CABG, in FY 2017. The program also incorporates a larger cohort of patients for the pneumonia measure than it has in the past. Historically, when new conditions have entered the readmissions program we’ve seen a corresponding uptick in penalties, and that’s happened this year as well. Although approximately the same percentage of hospitals are receiving a readmissions penalty this year as in FY 2016, the average readmissions penalty has increased by 24 percent in FY 2017.

We've mapped the final data below—click, drag, and zoom to see the estimated net P4P impact on FY 2017 Medicare revenues for any institution, color-coded by severity. You can also open the map in a new browser window to view it in full size.

FY 2017 P4P Penalty Impact Map

Q: FY 2017 is the fifth year of the VBP and readmissions reduction program. What are your thoughts as we look back at the last five years?

Fontana:  One thing to note is that the amount of revenue at risk has increased over time. We saw the HAC program commence in FY 2015, we've seen the VBP reach its maximum withhold amount of 2 percent this year, and we've seen new conditions taken into account in the readmissions reduction program.

The number of hospitals receiving a net penalty hasn't changed enormously year to year; it's fluctuated in the range of 66 to 73 percent. And there's a lot of continuity in which hospitals are receiving these penalties: 39 percent of participating hospitals have received a net penalty across all five years of the program.

One last thing to note: This year, 45 percent of participating hospitals received a penalty in more than one program—and we've seen similar penalty overlap since the programs begin. So the impact of compounding penalties is very strong.

Q: Do you see any future changes to the pay-for-performance programs that could impact hospitals' bottom lines?

Fontana: Yes—there are big changes in store for the HAC program next year. CMS will adopt a new scoring methodology: Rather than organizing hospitals into deciles for scoring, CMS will move to a new continuous scoring approach using z-scores. This scoring change is designed to reduce ties between hospitals, and it will shake up who is penalized under the HAC program.

CMS anticipates that the new methodology will penalize 114 hospitals that wouldn’t have received HAC penalties under the old scoring approach, while 103 hospitals that would have received a penalty will move into the clear. CMS also expects the z-score approach to reduce the HAC program’s impact on the largest and smallest hospitals.

Q: What should hospital leaders do if they want more information about pay-for-performance?

Join us tomorrow for our pay-for-performance webinar. We'll examine results from the VBP, readmissions, and HAC programs in FY 2017 and over the past five years, and we'll provide an overview of how the programs work and how they're changing in the next few years.

Register now

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