764 Hospitals Face Value-Based Penalties Under HAC Reduction Program

More than 700 hospitals will face value-based penalties in fiscal year 2022 after underperforming in Medicare’s Hospital-Acquired Condition (HAC) Reduction Program, according to an Advisory Board brief.

The HAC Reduction Program is a mandatory value-based program under the Affordable Care Act that aims to ensure patient safety during a hospital stay and reduce hospital-associated infections.

The program measures a hospital’s performance by monitoring the rates of avoidable complications, such as blood clots, bedsores, falls, central line infections, and other infections. Hospitals that perform poorly and fall in the worst-performing quartile lose 1 percent of their Medicare payments for the upcoming fiscal year.

In 2022, 764 hospitals will receive the value-based penalty after seeing high patient infection and complication rates during 2018 and 2019. CMS excluded data from 2020 due to the COVID-19 pandemic and the unusual circumstances that accompanied it. The agency plans to permanently disregard 2020 data from the HAC program calculations going forward.

Hawaii and Idaho were the only participating states where no hospitals received a cut to their Medicare payments this year.

Hospitals in Maryland are exempt from the value-based penalties, as are more than 1,000 critical access hospitals, children’s hospitals, psychiatric hospitals, and veterans hospitals.

Since its implementation in 2014, the HAC program has penalized 1,978 hospitals at least once as of 2021. Just over 1,300 of those hospitals have been penalized at least twice, while 77 hospitals have received Medicare payment cuts every year.

Hospitals and their stakeholders have been vocal about their criticism of the value-based program. They have stated that the program standards are arbitrary and do not produce fair results, the brief mentioned.

Additionally, opponents have argued that the program methodology punishes hospitals that routinely test for infections and other conditions in patients. These tests may reveal patient issues that would have gone unnoticed otherwise and affect the hospital’s performance measures.

According to Advisory Board, data from American Hospital Association (AHA) revealed that of the 768 hospitals penalized in 2017, only 41 percent had HAC rates that were significantly higher than unpunished hospitals.

Akin Demehin, director of policy at AHA, has called the HAC program “a game of chance” based on “badly flawed” measures, the brief noted.

The Medicare Payment Advisory Committee (MedPAC) has noted the importance of improving care quality through potential payment cuts but said that the HAC reduction program pits hospitals against each other and limits how many hospitals can succeed. The committee recommended that CMS provide hospitals with fixed targets instead of using the lowest-scoring quartile to determine which hospitals receive penalties.

The HAC reduction program could potentially sway hospital finances as well, depending on whether hospitals achieved the desired goal of reducing hospital-acquired conditions.

A study from IBM Watson Health revealed that hospital costs increased by $2 billion due to seemingly avoidable hospital-acquired conditions.

On the other hand, providers saw a 13 percent reduction in hospital-acquired conditions between 2014 and 2017 and subsequently saw a $7.7 billion reduction in hospital costs, according to data from the Agency for Healthcare Research and Quality.

However, a 2020 study found that value-based incentive programs—including the HAC Reduction Program and the Hospital Value-Based Purchasing (HVBP) program—failed to reduce hospital-acquired infections.