Pay for performance (P4P) continues to capture a great deal of attention.  (See some of my earlier posts on P4P.)

Following the issuance of an options paper and holding two listening sessions earlier this year, CMS, as required by the DRA, filed a value-based purchasing (VBP) plan with Congress (see more information about the listening sessions on the CMS hospital center page, halfway down on the right).  The law calls for a plan to be submitted so that enabling legislation for VBP (that’s CMS-speak for P4P) can be rolled out in time for implementation in FFY 2009.  The CMS VBP press release issued yesterday says:

The proposed VBP program . . . ties directly to two of the four cornerstones of the Secretary’s initiative to build a value-driven health care system: measuring and publishing quality information, and promoting the quality and efficiency of care.

The proposed VBP program contains the following key components:

    * A measure development and selection process, including selection criteria for choosing performance measures for the VBP financial incentive and candidate measures to support ongoing expansion of the measure set.

    * A Performance Assessment Model that incorporates quality measures, including clinical process of care, patient perspectives of care, and clinical outcomes, to calculate a hospital’s Total Performance Score. The proposed model scores a hospital’s performance on each measure during a 12-month measurement period based on the higher of “attainment” compared with national thresholds and benchmarks or “improvement” compared with the hospital’s own performance in the preceding 12-month baseline period.

    * The incentive is created by making a specified percentage of the base operating payment amount for all discharges contingent on performance.  The percentage of incentive earned would be determined by the hospital’s Total Performance Score.

    * Enhancements to the Hospital Compare site to support expanded and more user-friendly public reporting.


    * Ongoing evaluation and monitoring efforts to assess experiences early in VBP implementation, allowing for timely corrective action and building the evidence base for future VBP programs in other settings.   

Per Modern Healthcare, CMS’s Acting Administrator Kerry Weems says VBP enabling legislation could find its way into a Medicare bill now being worked up in the Senate.  The DRA timetable for VBP implementation is pretty aggressive.  Given the delays in getting the report in to Congress, one has to wonder about the likelihood of getting things rolling by FFY 2009 (which starts just ten months from now).

In some of my earlier posts (linked to above) I’ve expressed my concerns about P4P in general, which also apply to VBP in particular.  For example:

  • Provider focus on that which is measured (and rewarded financially) may cause other issues to fall off the table.
  • In a budget-neutral world, P4P bonuses to successful providers are drawn out of the pockets of less-successful providers — and those health care resources, perhaps located in the communities that truly need them most, are less able to provide services in the future.

It remains to be seen whether the government is capable of engineering a change in course for the supertanker that is the U.S. health care system. 

Update 11/28/07:  See the AHA’s perspective in today’s Kaiser Daily Health Policy Report, and other comments on the plan, collected in yesterday’s Kaiser Daily Health Policy Report.  One observation: Despite an understandable industry concern about the fact that the propopsal would require that "payments to all facilities would be cut by a flat 2% to 5% to fund the incentive pool for distribution to hospitals that show the most improvement or meet quality-of-care standards," the hospital industry’s call for paying incentives out of a new bucket of cash is a nonstarter.  Consider the British P4P experience, which nearly bankrupted the NHS in 2004See earlier post on P4P and CMS here.   

David Harlow