MEDICARE HOSPITAL QUALITY IMPROVEMENT ACT OF 2008

Senators Max Baucus and Chuck Grassley have introduced draft legislation to establish pay for quality performance rather than pay for services under the inpatient Medicare program.  It is tailored from the Value Based Purchasing (VBP) initiative developed by CMS and consists of an incentive payment paid on top of a base line DRG.  Hospitals would experience an increase or decrease in their inpatient DRG payments depending on how they perform on standard quality measures. 

Most of the measures are slated to be taken from the National Quality Forum (NQF) endorsed quality measures, and shall initially address the treatment of heart attacks, heart failure, pneumonia and surgical care currently tracked under the SCIP measures.  It would also include overall patient satisfaction of hospital care monitored through HCAHPs.  This value based program will build on the Pay for Reporting system in place today.  New measures may be added but they must be publicly reported on Hospital Compare before they can be introduced into the VBP program.

Qualification for incentive payments under the program can be earned through high achievement or through great improvement on the targeted quality measures.  The payments are calculated by taking a base operating DRG and then adding the hospitals VBP incentive percentage.  The program shall be budget neutral and the total amount available for value based incentive payments shall equal the total amount of reduced payments for all hospitals by deducting the incentive value from the base operating DRG for all hospitals for the fiscal year.

The proposal is to initiate the program in fiscal year 2012 and it will be phased in over five years, with full implementation in fiscal year 2016.  The bill calls for payment to gradually increase from one percent to two percent by 2016.  Demonstrations shall precede the program inception.

The full proposal is available at http://grassley.senate.gov/private/upload/11192008.pdf.