HAC REDUCTION PROGRAM PENALTIES: AN UNDUE BURDEN ON ESSENTIAL HOSPITALS?
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RESEARCH BRIEF December 2014
HAC REDUCTION PROGRAM PENALTIES:
AN UNDUE BURDEN ON ESSENTIAL HOSPITALS?
Authored by:
Brian Roberson, MPA
Katie Reid, MPH
KEY FINDINGS Medicaid Services (CMS) has admin-
istered three programs designed to
• The Hospital Acquired Conditions improve the quality and value of hospi-
Research Methods
Reduction Program creates tal care through financial rewards and Building on previous research
financial incentives for hospitals to penalties: the Value-Based Purchasing on the distribution of incentives
reduce hospital-acquired infections, (VBP) Program, the Hospital Read in Affordable Care Act qual-
injuries, and other adverse events. missions Reduction Program (HRRP), ity improvement programs, this
and the Hospital Acquired Conditions analysis investigates whether the
• The program’s application of (HAC) Reduction Program. Hospital Acquired Conditions
penalties to certain add-on Reduction Program dispropor-
payments could compound resource Each of these incentive-based pro- tionately penalizes certain types
shortages at essential hospitals. grams compares hospital performance of hospitals. We also compared
against national benchmarks. The VBP 30-day mortality rates to discover
• Previous findings show a similar Program creates a performance-based relationships between penalties
impact by other incentive-based payment model by rewarding high- and outcomes.
programs, such as the Value performers with an incentive payment
Based Purchasing and Hospital funded by penalties assessed to low- In this cross-sectional study, we
Readmissions Reduction programs. performers in the program. Over time, employed chi-square analysis to
the VBP Program will include addi- examine bivariate relationships
• Hospitals with more than 400 beds, tional measures and the percentage of between program penalties and
teaching hospitals, those treating Medicare payments it puts at risk will size, teaching status, patient acu-
highly complex patients, and increase from 1 percent in fiscal year ity, and essential hospital status
essential hospitals are more likely FY) 2013 to 2 percent by FY 2017.1 for a national sample of 3,263
to receive penalties. hospitals. T-tests were then used
HRRP seeks to reduce the number of to investigate differences between
• There is no evidence penalties avoidable readmissions. The program mortality rates in penalized and
aligned with outcomes at these penalizes hospitals for an excess of nonpenalized hospitals.
hospitals. readmissions that occur within 30
days of index admissions. CMS will
increase HRRP penalties to 3 per- hip arthroplasty (THA), and total knee
INCENTIVE-BASED QUALITY cent in FY 2015, from 2 percent in arthroplasty (TKA).2
IMPROVEMENT IN MEDICARE FY 2014 and 1 percent in FY 2013.
Many key policy changes in the Initial applicable conditions included The HAC Reduction Program creates
Affordable Care Act (ACA) focus on acute myocardial infarction (AMI), financial incentives for hospitals to
improving the quality of care delivered heart failure (HF), and pneumonia in reduce hospital-acquired infections,
by the nation’s health care system. fiscal years 2013 and 2014, and will be injuries, and other adverse events.
Since the ACA’s enactment in March expanded to include chronic obstruc- The Centers for Disease Control and
2010, the Centers for Medicare & tive pulmonary disease (COPD), total Prevention (CDC) has estimated that
1301 Pennsylvania Ave NW Ste 950 Washington DC 20004 | t: 202 585 0100 | f: 202 585 0101 essentialhospitalsinstitute.org 1HAC REDUCTION PROGRAM PENALTIES: AN UNDUE BURDEN ON ESSENTIAL HOSPITALS? December 2014
HACs are responsible for 99,000 payments, HAC Reduction Program
deaths and up to $33 billion in health penalties will apply to add-on pay- Putting DSH and IME
care costs nationally each year.3 For ments, such as disproportionate share
FY 2015, which started October 1, hospital (DSH) and indirect medi- payments at risk for HAC
2014, CMS will penalize hospitals cal education (IME) payments. DSH Reduction Program penalties
that perform poorly on a subset of payments compensate hospitals for
HAC measures (Figure 1) that will costs associated with caring for low- raises serious questions for
include standardized infection ratios income patients, who, on average, are essential hospitals.
(SIRs) for central line-associated sicker and use more hospital resources
blood stream infection (CLABSI) at a higher cost than other patients.4
and catheter-associated urinary tract IME payments are funds intended to The inclusion of these additional
infection (CAUTI), as well as Agency offset the added costs of operating a penalties into the HAC Reduction
for Healthcare Research and Quality teaching hospital.5 Program has the potential to com-
(AHRQ) patient safety indicator pound resource shortages at these
90 (PSI 90), a composite measure Putting DSH and IME payments at essential hospitals, which already
that comprises eight submeasures risk for HAC Reduction Program typically operate with negative or near-
(Figure 1). penalties raises serious questions for negative margins, creating a feedback
essential hospitals—those that care for loop of inadequate resources for
HAC PROGRAM RAISES POLICY large volumes of uninsured and other improvement.6, 7 In light of these con-
CONCERNS vulnerable patients and that often cerns, the HAC Reduction Program
Under the HAC Reduction Program, serve as academic medical centers has come under scrutiny for includ-
the poorest performing 25 percent of and teaching hospitals: Are they more ing measures that have already been
the nation’s hospitals will sustain pen- likely to face penalties, and will penal- included in the VBP Program and for
alties equal to 1 percent of their total ties be disproportionately larger as a its arbitrary penalization of 25 percent
Medicare inpatient payments. Unlike percentage of income than for other of hospitals without regard for qual-
the VBP and HRRP programs, which types of hospitals? ity improvement nationwide. Further,
apply penalties only to base inpatient many policy experts and hospital
leaders argue that the program is not
founded in adequately reliable mea-
FIGURE 1: BREAKDOWN OF HAC REDUCTION PROGRAM DOMAIN WEIGHTING sures that successfully differentiate
high and low performers, leading to
bias against larger hospitals, teaching
AHRQ PSI 90 SUBMEASURES
hospitals, and those that treat more
PSI 3 Pressure Ulcer Rate
complex patients.8, 9, 10 These biases,
PSI 6 Latrogenic Pneumothorax Rate they contend, could lead to increased
PSI 7 Central Venous Catheter-Related disparities in care for patients who rely
Blood Stream Infection Rate on essential hospitals.
PSI 8 Postoperative Hip Fracture Rate
PSI 12 Postoperative Pulmonary Further debate surrounding the HAC
Embolism (PE) or Deep Vein Reduction Program centers on the
Thrombosis Rate (DVT) Domain 1 outcomes measures included within
PSI 13 Postoperative Sepsis Rate AHRQ PSI 90 the program, particularly the PSI 90
35%
composite measure. As administra-
PSI 14 Wound Dehiscence Rate
tively derived data that is not clinically
PSI 15 Accidental Puncture and validated, its utility for comparisons
Laceration Rate Domain 2 between hospitals has been questioned
CLABSI and CAUTI due to the influence of coding differ-
SIR Rates ences among organizations.11 Also
65% included in PSI 90 are measures of
pressure ulcer rates and accidental
puncture, measures that have been
linked to patients’ socioeconomic
status and complexity.12, 13
1301 Pennsylvania Ave NW Ste 950 Washington DC 20004 | t: 202 585 0100 | f: 202 585 0101 essentialhospitalsinstitute.org 2HAC REDUCTION PROGRAM PENALTIES: AN UNDUE BURDEN ON ESSENTIAL HOSPITALS? December 2014
spective payment system (IPPS) A T-test measures the difference
Further debate surrounding proposed rules, including the FY 2014 between two means and determines
impact file; the American Hospital the likelihood that mere chance caused
the HAC Reduction Program Association (AHA) Annual Survey of the difference.
centers on the outcomes Members for FY 2012; and the CMS
Hospital Compare July 2014 release. All p-values for statistical tests were
measures included within the We gathered CMS-estimated HAC two tailed and alpha was set at 0.01.
program, particularly the PSI Reduction Program scores from the Analyses were performed using the
FY 2015 IPPS proposed rule; infor- SAS statistical package version 9.4.
90 composite measure. mation on bed size and Council of
Teaching Hospitals (COTH) affiliation RESULTS: DISPROPORTIONATE
A recent study by Gilman et al. ,
14 from the FY 2012 AHA survey; and PENALTIES ON ESSENTIAL
DSH patient percentages and HOSPITALS
published in the August 2014 edi-
transfer-adjusted case mix indices Of the 3,263 hospitals in our sample,
tion of Health Affairs, examined the
from the FY 2014 impact file. 743 were estimated to be penalized
likelihood of essential hospitals in
California incurring disproportionate under the HAC Reduction Program
penalties under the VBP and HRRP For the purpose of this analysis, we with a 1 percent reduction in CMS
programs. The study also looked at categorized essential hospitals as those hospital payments. Penalties are
differences in 30-day mortality rates as with a DSH patient percentage in the mandated to be applied to the worst-
measures of differences in the quality top quartile of the sample. Hospitals performing 25 percent of hospitals
of care between those hospitals and in the top quartile of case mix indi- nationally. However, we found that
hospitals that do not fill a safety net ces were designated as treating 38.2 percent of hospitals with more
role. Findings showed that essential patients with high-acuity conditions. than 400 beds were estimated to
hospitals had lower 30–day risk- This allowed us to examine bivari- be penalized, compared with 20.33
adjusted mortality rates for AMI, HF, ate relationships between program percent of hospitals with fewer beds.
and pneumonia than non-safety net penalties and size, teaching status, Teaching hospitals, defined in our
hospitals, yet were more likely than patient acuity, and essential hospital analysis as being a member of the
those other hospitals to be penalized status for a national sample of 3,263 COTH, faced penalties at a rate
under both the VBP and HRRP hospitals. We used Pearson chi-square of 54.47 percent, while only 20.19
programs. tests to reveal any statistically signifi- percent of non-teaching hospitals
cant differences in the proportion of faced penalties. Both of these find-
Building upon the research of Gilman hospitals estimated to receive penalties ings represent statistically significant
et al., this analysis investigates in each test group. This test compares differences.
whether certain types of hospitals the observed proportion of penalized
nationally would be disproportion- hospitals with the expected propor-
ately penalized by the HAC Reduction tion, given a null relationship between Essential hospitals were nearly
Program. Specifically, we seek to being a member of a particular
determine the likelihood that hospitals group and receiving HAC Reduction 8 percentage points more likely
having 400 or more beds, teaching Program penalties. to be penalized than those that
hospitals, those that serve complex
patients, and essential hospitals will As a secondary goal of our analysis, do not care for large volumes of
receive penalties. By comparing this we sought to determine whether any vulnerable patients.
likelihood against mortality rates as a disparities in penalties under the
direct measure of health outcomes, we HAC Reduction Program could be
can further investigate whether such explained by disparities in health In addition, we found that patient
penalties are justified as indicators of care outcomes at penalized hospitals. acuity and status as an essential
poor quality performance. We used mortality rates from CMS hospital were associated with a higher
Hospital Compare as our primary proportion of penalties. Those that
METHODS BEHIND THIS STUDY outcomes indicator. Outcomes data treated patients with an average higher
Data from four sources were used were available for 2,385 of our original acuity, were more than 10 percentage
in the course of this analysis: data sample of 3,263 hospitals. T-tests were points more likely to be penalized than
released as part of CMS’ fiscal used to test for significant differences those with a lower average patient
years 2014 and 2015 inpatient pro- in group means within each test group. acuity. Essential hospitals were nearly
1301 Pennsylvania Ave NW Ste 950 Washington DC 20004 | t: 202 585 0100 | f: 202 585 0101 essentialhospitalsinstitute.org 3HAC REDUCTION PROGRAM PENALTIES: AN UNDUE BURDEN ON ESSENTIAL HOSPITALS? December 2014
increased likelihood of penalization
TABLE 1 PENALIZATION PROPORTIONS AMONG TEST GROUPS under the HAC Reduction Program.
PENALIZED P-VALUE To further investigate any relation-
> 400 Beds 38.20% ship between program penalties andHAC REDUCTION PROGRAM PENALTIES: AN UNDUE BURDEN ON ESSENTIAL HOSPITALS? December 2014
age margins that often are lower than that these low-volume hospitals are
Systematic biases against 2 percent.17 Accumulated financial under-represented in our sample.
penalties assessed under ACA qual- However, we believe the effect of these
certain categories of hospitals ity initiatives, combined with other missing outcomes measures would
may serve to increase payment cuts from the ACA, likely be minimal due to the low volume of
will limit the ability of these essential these hospitals.
socioeconomic disparities in hospitals to conduct quality improve-
care delivery. ment activities, potentially leading to Second, due to the timing of this study,
lower baseline performance measures we were forced to rely on estimates of
and slower improvement on quality penalties in our analysis rather than
Our own analysis found similar results measures.18 More concerning might be actual assessed penalties. The accuracy
when examining penalties assessed that as penalties are applied to a larger of our analysis is limited to the accu-
by the HAC Reduction Program. We portion of these hospitals’ income, the racy of these estimates.
found that even though mortality resulting financial stress could lead
rates among essential hospitals were hospitals to discontinue or limit ser- CONCLUSION
either lower or not statistically differ- vices, which, in turn, could limit access As these programs mature, policy-
ent than those of other hospitals, they to care for the vulnerable populations makers and researchers should give
were nearly 8 percentage points more they serve. careful consideration to inequalities
likely to be penalized under the HAC in the application of penalties in all
program. This calls into question the STUDY LIMITATIONS TO CONSIDER such improvement programs—and
ability of these programs to measure Research on the impact of ACA quality in the HAC Reduction Program in
true differences in the quality of care programs is still in the early stages and particular. Additional consideration
essential hospitals deliver. data collection methods are not as should be given to the unique needs of
robust as we would like. As a result, vulnerable patients and the essential
Additionally, we found that teach- our study has two main limitations. hospitals that care for them. Further
ing hospitals, hospitals with more Outcomes data for the entire sample research is needed to more fully exam-
than 400 beds, and hospitals treat- of hospitals eligible for the HAC ine the links between patient complex-
ing patients with high-acuity condi- Reduction Program are not avail- ity and socioeconomic status and the
tions are significantly more likely to able due to volume requirements for various measures the HAC Reduction
be penalized than other institutions. hospital reporting of these measures. Program covers.
Systematic biases against certain We chose not to limit our penalty
categories of hospitals may serve to data to this smaller sample to provide
increase socioeconomic disparities in the broadest possible examination of
care delivery. At risk are hospitals with the penalty probabilities for our test
chronic resource constraints and aver- groups. This creates the possibility
TABLE 3 MORTALITY RATES BY PENALTY
ACUTE MYOCARDIAL INFARCTION HEART FAILURE PNEUMONIA
Non- Non- Non-
Penalized Penalized P-Value Penalized Penalized P-Value Penalized Penalized P-Value
>400 14.77 14.85 0.418 10.97 11.34 0.024 11.42 11.49 0.695
Bed Size
≤ 400 15.18 15.21 0.683 11.87 11.79 0.405 11.92 11.96 0.696
Yes 14.66 14.44 0.311 10.88 11.13 0.263 11.28 11.16 0.595
Teaching Status
No 15.15 15.20 0.528 11.82 11.76 0.557 11.92 11.94 0.838
High 15.15 15.26 0.384 11.28 11.28 0.990 11.89 11.84 0.816
DSH
Low 15.00 15.12 0.131 11.77 11.86 0.320 11.73 11.90 0.074
High 14.75 14.85 0.492 11.38 11.53 0.320 11.59 11.62 0.865
Case Mix Index
Low 15.21 15.24 0.743 11.74 11.78 0.700 11.89 11.97 0.476
1301 Pennsylvania Ave NW Ste 950 Washington DC 20004 | t: 202 585 0100 | f: 202 585 0101 essentialhospitalsinstitute.org 5HAC REDUCTION PROGRAM PENALTIES: AN UNDUE BURDEN ON ESSENTIAL HOSPITALS? December 2014
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