Quality-Based Reimbursement: Will It Weed Out the Weak?

How Medicare pays for services is changing. What are the implications for EMS?

How hospitals get paid for services to Medicare patients is changing. That may or may not be your problem, but it’s something you should observe with interest. Those changes may reflect the future of ambulance reimbursement.

In its own words, Medicare’s new Hospital Value-Based Purchasing Program means that “for the first time, hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide.” In fiscal year 2013, the HVBP program will distribute around $850 million based on hospitals’ performance toward a set of quality measures intended to enhance care processes and patient satisfaction. Those that perform better will get more; those that perform worse will get less.

Imagine changes like that coming to the ambulance business in coming years. It will represent a profound change in how we get paid for what we do.

“It’s very clear that in the not-so-distant future, part of our reimbursement is going to be based on quality measures,” says Rick Keller, a partner with well-known EMS consultants Fitch & Associates and an expert in EMS finance. “There’s going to be a movement toward ensuring that any healthcare services delivered are measured against some quality criteria. The challenges are going to be, how do we measure, how do we quantify, and how do we actually determine value in the process?”

Current efforts to improve healthcare quality have their roots in the Bush Administration, which promulgated the concept of quality measures. The idea was that they could provide an objective way for both consumers and government payers to compare the performance of different systems. Reimbursement would be tied to collecting and reporting data, and then to meeting certain thresholds, or at least improving your performance. Ultimately, compensation would come to reflect value—what are you expending in resources to achieve your level of quality?

For providers who would be thusly paid, this meant a big to-do list: They had to develop relevant measures, collect performance data, establish benchmarks and help craft attainment- and improvement-based payment mechanisms. To enhance value, they further needed measures of resource use and steps to improve efficiency.

This kind of performance-based reimbursement began for hospitals in 2007 and physicians in 2009. Others are coming next, but this model will likely be applied to the ambulance industry within the next 5–10 years.

It’s not possible to foretell the specifics yet, but consider how the reimbursement adjustments worked for hospitals. They began collecting data in 2003 and faced a 2% reimbursement decrease if they weren’t reporting it by FY07. More cuts are due next year for the persistently noncompliant.

This year hospitals worked off 25 sets of measures. They included 17 clinical process-of-care measures in five categories (AMI, heart failure, pneumonia, healthcare-associated infections and surgical care improvement) and eight drawn from consumer perceptions, including areas like communication with doctors and nurses, staff responsiveness and pain management.

The trick is to incentivize improvement without adding costs. To that end, hospitals face automatic reductions in their Medicare reimbursement over the coming years, but can earn money back through the value-based purchasing process. It works comparably for physicians in areas like quality reporting, electronic prescribing and electronic health records: Generally docs get a reward for complying that gradually shrinks over time until it becomes a penalty for not complying.


All of this portends the future, unless it doesn’t. Accountable care organizations (ACOs) could shape a different tomorrow, albeit with some similarities.

“Overall, there are two kind of diverging areas of momentum,” says Keller. “We have the value-based purchasing process going in one direction, but then we have the push for the accountable care organizations in the other.”

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