Breaking Down Common CMS Value-Based Payment Programs

Quality Payment Program

In 2015, legislators passed the Medicare Access and CHIP Reauthorization Act (MACRA), ending the Sustainable Growth Rate formula. MACRA requires all clinicians to participate in the Quality Payment Program (QPP) through one of two possible tracks: the Merit-Based Incentive Payment System (MIPS) or an Advanced Alternative Payment Model (APM).

Merit-Based Incentive Payment System

Clinicians can participate in MIPS as an individual, group, virtual group, or an APM entity. MIPS eligible clinicians receive payment adjustments based on their performance across four categories: quality, promoting interoperability, improvement activities, and cost. The composite score for all four categories determines the change in a provider’s Medicare reimbursement rate.

Each category is weighted differently. Due to the COVID-19 pandemic, CMS reweighted the cost performance category weight for the 2020 and 2021 performance years to 0 percent. The original 20 percent for the 2021 cost performance category will be redistributed to the other performance categories.

For the 2021 performance period, which determines 2023 payment rates, the maximum payment adjustment is 9 percent in either direction. Through 2024, there is an additional bonus of up to 10 percent for providers that score in the top 30 percent.

Healthcare providers have faced challenges during their MIPS participation, the Government Accountability Office (GAO) found. For example, some providers reported untimely or irrelevant feedback from CMS, while others noted that certain quality measures did not assess common activities for their specialty.

Advanced Alternative Payment Models

Through the Advanced APM track, providers receive a 5 percent incentive payment by participating in an innovative payment model that rewards high-quality and cost-efficient care. In addition, qualifying providers are exempt from MIPS participation.

An APM is considered advanced if it requires participants to use certified EHR technology, offers payments for covered professional services based on similar quality measures used in MIPS, and requires participants to bear significant financial risk.

For 2022, providers must receive at least 50 percent of their Medicare Part B payments or see at least 35 percent of Medicare patients through the APM during the performance period to qualify for APM participation.

Healthcare organizations have called on Congress to increase the 5 percent incentive payments for Advanced APM participants to boost APM adoption and lower healthcare costs through value-based care delivery.

Hospital Value-Based Purchasing (VBP) Program

The Hospital VBP Program is one of four value-based payment programs implemented under the Affordable Care Act. The program offers incentive payments to acute care hospitals for the quality of care provided in inpatient hospital settings. Hospitals receive payment adjustments under the Inpatient Prospective Payment System (IPPS).

The program withholds 2 percent of hospital Medicare payments and uses the estimated total of the reduction to provide incentive payments to hospitals based on their performances. Hospital scores are based on mortality and complications, patient safety, patient experience, healthcare-associated infections, and efficiency and cost reduction.

Hospitals can receive an achievement score and an improvement score for each measure. The higher score is used as the final score that determines reimbursement adjustments. In addition, payments are adjusted based on how well hospitals perform compared to other hospitals or how much they improve their own performance compared to past results.

Hospital Readmissions Reduction Program (HRRP)

Under the HRRP, CMS aims to minimize the number of avoidable hospital readmissions by incentivizing hospitals to improve post-discharge planning through communication and care coordination efforts.

The program monitors readmission rates in general acute-care hospitals for acute myocardial infarction, chronic obstructive pulmonary disease, heart failure, pneumonia, coronary artery bypass graft surgery, and elective primary total hip arthroplasty and/or total knee arthroplasty. The program considers the excess readmission ratio (ERR) for each circumstance, which is a ratio of the predicted to expected readmission rates.

Depending on the ERR for readmissions within 30 days of discharge, CMS will alter hospital reimbursement rates based on the payment adjustment factor for each hospital. The average penalty for fiscal year 2022 is 0.64 percent, though some hospitals faced cuts up to 3 percent, according to data from the Kaiser Family Foundation (KFF).

Additionally, KFF found that more than 1,200 hospitals faced penalties under HRRP every year for the last 10 years.

Hospital-Acquired Condition (HAC) Reduction Program

The HAC Reduction Program aims to reduce the number of conditions patients experience during their hospital stay, including pressure sores, hip fractures, postoperative respiratory failure, and postoperative sepsis.

Hospitals that fall in the lowest-performing quartile of the program receive a 1 percent cut to their Medicare reimbursement. The adjustment is applied after CMS administers any payment changes from the Hospital VBP Program, the HRRP, and disproportionate share hospital payments.

A handful of hospitals are exempt from the HAC Reduction Program, including all Maryland hospitals, more than 1,000 critical access hospitals, children’s hospitals, VA medical centers, and psychiatric hospitals.

Studies have shown that value-based penalties have done little to improve hospital performance despite the program’s good intentions. In fiscal year 2022, more than 700 hospitals will receive the 1 percent reduction after seeing high patient infection and complication rates during 2018 and 2019.

End-Stage Renal Disease Quality Incentive Program (ESRD QIP)

The ESRD QIP’s goal is to promote high-quality care in renal dialysis facilities. Facilities can receive a maximum payment reduction of 2 percent if providers do not meet or exceed performance standards for certain measures. The deduction applies to all payments for services performed at the facility during the applicable payment year, CMS said.

Facilities receive scores based on clinical measures and reporting measures. When determining clinical measure scores, CMS compares facility performance to other organizations and the facility’s own performance during the previous year. Reporting measure scores are based on whether a facility provided the required data.

Some quality measures in the program include standardized transfusion ratio, ultrafiltration rate, hospitalization ratio, and ICH CAHPS Survey results. In November 2021, CMS updated the value-based payment program measures to address health equity.

Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program

The SNF VBP Program was established under the Protecting Access to Medicare Act. The program alters Medicare payments for all SNFs paid under Medicare’s SNF Prospective Payment System (PPS).

Similar to the Hospital VBP Program, CMS withholds 2 percent of SNF Part A payments and redistributes 60 percent of the payments as incentives. Incentive rewards are based on SNF improvement and achievement scores for performance on a hospital readmission measure.

In its proposed SNF PPS rule for fiscal year 2023, CMS proposed assigning all participating SNFs a performance score of zero to mitigate the effect of the COVID-19 pandemic on final scores.