Value-based purchasing refers to financial payment incentives to reward healthcare providers for realizing high quality of care. Several value-based purchasing programs were established under the Patient Protection and Affordable Care Act (ACA), with the Hospital Value-Based Purchasing (VBP) Program representing perhaps the most extensive program.¹ The VBP program rewards hospitals with financial incentives related to high quality outcomes for Medicare inpatient acute care patients.² The legislation assigns the Centers for Medicare and Medicaid Services (CMS) the task of establishing benchmarks to measure quality outcomes and is designed to work in conjunction with the Inpatient Quality Reporting (IQR) Program.³ CMS’s final rule, published May 6, 2011, creates tension between the VBP and IQR programs regarding the timeline of accountability, leading to concerns within the medical community.⁴

To determine incentive payments under the VBP program, hospitals are provided a score based on its performance data compared to other hospitals. Performance measures are subject to restrictions, including that all measures must first be included in the IQR program, created within the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, with additional measures added through various CMS final rules and certain measures displayed on the CMS “Hospital Compare” website (www. hospitalcompare. hhs.gov).⁵ Scores are also affected by how hospitals performance has improved over time.⁶ To allow for time comparisons and accurate benchmarking, an IQR performance measure may not be selected by CMS for the VBP program unless the data has been displayed on CMS’ “Hospital Compare” for at least a year prior to a performance period.⁷ Despite these restrictions, on May 6, 2011, CMS released a final rule adding measures to both the VBP program and the IQR program simultaneously.⁸

In response to the stipulations listed in CMS’s Final Rule, the American Hospital Association (AHA), which represents over 5,000 hospitals in the U.S., stated that the Final Rule was inconsistent with the specifications outlined in the ACA.⁹ Additionally, the AHA claimed that the Final Rule may “unfairly and adversely impact” hospitals that would have otherwise benefited from the VBP program.¹⁰ The AHA criticized CMS that the Final Rule may weaken the very intent of the VBP program; that simultaneous inclusion of measurements in both the IQR and VBP programs could cause compliance issues for hospitals, potentially ending the VBP program as a whole.¹¹

The VBP program is set to begin applying to Medicare inpatient discharges occurring on or after October 1, 2012, with payments being issued in FY 2013, using several performance measures. Some of the key measures include: Medicare spending per beneficiary, which has a performance period beginning May 15, 2012; Hospital-acquired Conditions (HAC), which has a performance period beginning March 3, 2012; and, AHRQ Composite Measures, which has a performance period beginning March 3, 2012.¹² Though CMS claims to have included the necessary data for each measure on the Hospital Compare website a year in advance, AHA criticizes the data provided as insufficient or failing to meet statutory requirements.¹³

Time allowances give hospitals an opportunity to examine internal efficiencies and increase the probability of achieving designated benchmarks and quality improvement initiatives. Without such considerations, meeting performance measures could become more difficult, causing financial incentives to be an insufficient motivator for hospital to improve quality.¹⁴ In an attempt to reconcile inconsistencies between the programs, the AHA has asked that CMS delay the implementation of the VBP program until 2014.¹⁵