With penalties for Medicare and Medicaid readmissions in effect and the first year of payouts and penalties from the Centers for Medicare & Medicaid Services' Hospital Value-based Purchasing Program distributed for fiscal 2013, the era of payment and delivery reform officially has arrived. Hospitals across the nation are automatically participating in these new payment models — ready or not.

Money on the Line

The revised payments associated with these programs signal the federal government's most all-encompassing effort so far to distribute risk and hold providers financially accountable for the quality of care they deliver. These pay-for-performance efforts are, of course, complemented by an array of pilot accountable care organization and bundled payment projects.

While we can argue whether the money at stake in the startup phase of these programs is enough to motivate providers, the potential impacts to the health system are worth noting. Take readmissions: The industry data tell us that three-quarters of all hospitals may face some degree of readmissions penalty. It is also estimated that nearly 60 percent of hospitals and health systems will see readmissions payment reduction between $10,000 and $500,000.

Furthermore, although the VBP program was designed so that roughly half of all hospitals will receive a bonus payment while the other half will experience reduced payments, about two-thirds will end up losing money this year after the readmissions penalties are factored in, according to a Kaiser Health News analysis of Medicare's VBP payout data for fiscal 2013.

In all, during the coming years, approximately 5 to 7 percent of a provider's entire Medicare marketbasket dollars will be at risk based on performance in a variety of patient safety, quality and outcome measures. This impact will be compounded by parallel private sector efforts to improve care through payment changes. Managing the tsunami of reform measures, maintaining the ever-changing standards of care and implementing best practices are key challenges for the industry at large — providers, payers and vendors alike.

In adapting to these new payment models, electronic health records should be viewed not only as a means to earn meaningful use dollars, but also as one of the most effective tools for positioning an organization to perform well against VBP and other payment reform metrics.

Game On

As the U.S. health care system moves from a volume-based business model that incentivizes utilization to a value- and outcomes-based model that incentivizes performance and quality, providers will require sophisticated information technology tools that support care delivery and related operations, but also enable increased transparency in real time. Indeed, the need has never been greater to look inward, to ask more of IT and to chart a course for clinical process improvement.

Of course, health care leaders can certainly write off the CMS carrots and sticks as noise among other pressing issues and choose to do nothing. But savvy organizations will use the initial reform rollouts and the lower risk/reward factor as a time to focus on areas needing improvement and allow the organization to gain experience before penalties increase.

For example, Kaweah Delta Medical Center in Visalia, Calif., decided to view the VBP initiative as the next chapter in its clinical and patient satisfaction improvement efforts. The challenge was assessing how it was performing against the VBP measures and, more importantly, how its current technologies could be applied to help meet those standards.

Upon establishing its VBP financial incentive opportunity to be about $800,000, the executive team's discussion of prioritizing areas of focus evolved considerably. The organization's specific focus was on addressing and improving documentation and data collection requirements related to the 12 clinical process-of-care measures across the conditions: acute myocardial infarction, heart failure, pneumonia and the Surgical Care Improvement Project, as outlined by the VBP legislation.

Securing key stakeholder involvement — led by the CEO — and tapping the expertise of a multidisciplinary clinical, quality, IT and operational team, Kaweah Delta's VBP project established baseline metrics to provide a current-state analysis and a method to analyze how various process changes could help generate the appropriate outcomes. The organization then was able to use its existing workflow-based clinical solution to prospectively automate numerous clinical processes, data collection and reporting.

Today, Kaweah Delta relies on its IT system to be its eyes and ears — continuously monitoring processes throughout the organization and alerting staff when steps are not taken, when they occur in an incorrect sequence or take too long. System analytics can help managers understand whether the organization is doing a good job of following its re-engineered processes in real time. These analytics also can point out processes that seem to have uneven performance and can suggest additional training or further re-engineering.

Key Considerations

Like Kaweah Delta, a number of providers have established internal programs to prioritize and initiate their payment and delivery reform preparations. Several key suggestions are worth sharing as others get their reform initiatives off the ground:

Put inefficient areas of the hospital under the microscope. The concept of continuous process improvement should be embedded in every provider organization. Look closely at areas of your hospital with the lowest current performance, while highlighting areas of high performance. Look at the data, make changes and work with your quality and clinical staff to adapt your processes accordingly. Keep in mind that positive movement forward will be rewarded. In a VBP model, even low-performing areas can qualify for high payments if they demonstrate strong year-over-year improvement.

Do not underestimate the need to raise performance awareness. While it's nice to think that most U.S. hospitals, with just a few exceptions, uniformly perform well in following basic standards of care, that's simply not the case. What's even more surprising, though, is the lack of awareness that can exist at the highest levels of an organization — right up through the board.

An interesting study a few years back by Ashish Jha and Arnold Epstein of the Harvard School of Public Health found that not one of the board chairmen in the bottom 10 percent of the poorest-performing hospitals thought they were below average. In fact, the majority thought they were above average. Very telling indeed.

A great deal of internal education regarding an organization's current performance level and, more importantly, how the organization performs against its peers and nationally, will be needed to mount a successful performance-improvement initiative. Plan on a fair number of meetings in which clinical leaders are educated to understand performance levels and their related effects. From the very top of the organization on down, the goal is achieving agreement on a strategy for tackling the various payment and delivery reform measures.

Cross-organizational governance is essential. Multidisciplinary participation in payment and delivery reform preparations is critical. Leaders from across the C-suite, including the CEO, are needed to champion the effort. Additionally, the overall project should be viewed as a clinical performance-improvement initiative, not an IT project.

IT must prospectively guide care processes and decisions. In a value-based purchasing world where each core measure needs to be associated with what's happening today, performance-improvement interventions must occur in real time — that is, while the patient is still in the acute care cycle. Therefore, sophisticated IT tools such as workflow and rules engines that push information to the front lines, guiding decisions at the point of highest possible impact, will be required.

Investment in comprehensive data collection and reporting systems (both prospective and retrospective) is critical. Successfully achieving the objectives of payment and delivery reform does not occur at a single point in time. Therefore, it becomes necessary to implement a suite of dashboards and workflow elements that help providers know they are complying with a certain set of measures today and that they will be able to monitor their continual performance.

Equally important is retrospective monitoring — finding out what didn't happen and why. For example, if a care provider failed to respond to an alert in a timely fashion, or deviated from a given standard-of-care process, we can use these data to determine if new care interventions are necessary, or if we need to alter an individual's care plan.

Likewise, knowing that a patient failed to keep an appointment or was unexpectedly seen in the emergency department will let us know if there have been deviations from the expected plan of care. Tracking patient noncompliance will allow us to find opportunities to engage in new ways to manage chronic disease, presumably for the betterment of an individual's health.

With providers facing penalties for readmission, it will be more important to understand if it's the treatment that failed, the discharge plan that failed, or the patient who did not follow through on the post-discharge plan. 

Little things can mean a lot. For some of the metrics CMS is using for the VBP program, there is not a large degree of differentiation in performance among providers. For instance, according to the Kaiser Health News analysis of the fiscal 2013 payout data, 97 percent of pneumonia patients in a U.S. emergency department had a blood culture performed before receiving their first dose of antibiotics. Therefore, when just a few patients do not receive a test on time, or they negatively rate the communication and responsiveness of doctors and nurses, or they complain about the cleanliness and quietness of their environment, it can make a notable impact on how a hospital ranks among its peers.

So, if you think that preparing for payment and delivery reform isn't everyone's job — from nursing to dietary to housekeeping — think again.

Patient satisfaction is exponentially more important. As we know, patient satisfaction — as measured by Hospital Consumer Assessment of Healthcare Providers and Systems survey scores — represents 30 percent of the weighted total for VBP reimbursement, with clinical process-of-care measures making up 20 percent, outcome measures 30 percent, and efficiency measures 20 percent of the total performance calculation score for VBP reimbursement for fiscal 2015.

Now that a patient's rating of his or her inpatient experience affects CMS reimbursement, providers are wise to take patient feedback more seriously than ever.

Don't wait to get started. As health care leaders begin recognizing the financial impact of payment reforms such as VBP, they often come to two common misconceptions: (1) It's too late to worry about that now (several years in, with regard to performance periods); or (2) That's something that can be worried about next year. Both views stymie progress and can hamper an organization's ability to meet specified performance measures.

The measurement process for fiscal 2015 is under way today. Measurement and payments already have been determined for fiscal 2014. What must be acknowledged is that what happens today impacts payments two years from now. The time to get started is now.

Providing Ideal Patient Care

Time will tell if the industry's efforts toward delivery and payment system reform bring about the intended results of improved quality, reduced cost and a health care system refocused on accountability.

The question remains if the current Medicare and Medicaid revised payments are enough to move the performance needle. Still, for hospitals that treat a significant number of Medicare patients, hundreds of thousands of dollars are at stake. As such, the nation's providers ought to be taking a serious look at known process inefficiencies and implementing course corrections that maximize existing IT investments.

As we know, many hospitals and health systems do not operate from a position of excess revenue, and as outcomes become increasingly tied to the reimbursement stream, it will become critical that providers can rely on their IT tools to detect and remedy variations in care. By optimizing care environments through a variety of program dashboards and workflows, best practices can be embedded within a health care provider's core clinical processes.

To thrive in the new value-based environment, health care organizations must use decision-making tools that present options and require actions in near-real time. This will aid not only in meeting the requirements of new reimbursement systems but, more importantly, will produce ideal clinical outcomes for patients — a goal the industry should have no mixed feelings about.

John Glaser, Ph.D., is the CEO of the health services business unit of Siemens Healthcare in Malvern, Pa. He is also a regular contributor to H&HN Daily. Neeraj Chopra is the director of strategic consulting, Healthcare Reform Practice, Health Services, at Siemens Healthcare.