New Developments in Payment and Public Reporting of Quality of Care

11 December 2008 Publication
Author(s): Nathaniel M. Lacktman

Legal News Alert: Health Care

The Centers for Medicare & Medicaid Services (CMS) has significantly expanded its quality initiatives beyond inpatient hospitals to other health care professionals and entities with the recent release and issuance of several rules and determinations. The Physician Fee Schedule Final Rule (PFS Final Rule) and the Outpatient Prospective Payment System Final Rule (OPPS Final Rule) expand CMS’ policy of tying payment to the reporting of quality data to physicians, certain other health care professionals, and hospital outpatient departments. Three new national coverage determinations (NCDs) define certain “never events” as non-covered services for all suppliers and providers. This expansion of “pay for reporting” is important because CMS intends that these programs, including existing hospital inpatient pay–for-reporting programs, will soon change so that payment will be tied to how well a provider performs in meeting the quality measures, rather than just on reporting.

The PFS Final Rule also provides eligible professionals with a new incentive for implementing successful e-prescribing capabilities. With this new incentive, physicians and other eligible professionals will have an opportunity to earn an additional four percent of allowable Medicare payments, if they are successful in meeting both the quality reporting and e-prescribing requirements.

Finally, to further CMS’ policy of denying payment for preventable medical conditions, CMS proposes to expand the hospital acquired condition (HAC) policy beyond inpatient care to physicians and other health care entities, and to deny payment altogether for certain never events. The following is a discussion of the key features of these new issuances.

Physician Quality Reporting Initiative (PQRI)

The importance of PQRI for physicians and other health care professionals should not be underestimated. CMS has made it clear that pay-for-reporting programs are the basis for transitioning to “pay-for-performance” (called Value-Based Purchasing by CMS). For physicians and other health care professionals, CMS is required to develop and submit to Congress a Value-Based Purchasing plan by May 1, 2010. This stepwise transition for health care professionals from pay for reporting to Value-Based Purchasing mirrors the approach used by Congress and CMS in developing Value-Based Purchasing for hospitals, which is likely to take effect by 2012, assuming recent legislation introduced in Congress within the last few months is enacted.

The PFS Final Rule expands PQRI to include 153 quality measures, which is more than the 119 measures in 2008, but fewer than the 175 measures in the proposed rule. The measures include the 2008 PQRI measures plus certain measures endorsed by the National Quality Forum (NQF) and/or AQA (formerly the Ambulatory Care Quality Alliance). In addition to individual measures, the 2009 PQRI program will include seven “measure groups,” defined as a subset of PQRI measures that have a particular clinical condition or focus in common. Details regarding the specific measures and measure groups that are included in PQRI for 2009 can be found at Technical specifications for reporting the measures and measure groups in the 2009 final listing will be posted to the “Measures/Codes” tab of the PQRI section of CMS’ Web site no later than December 31, 2008.

Due to changes made by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), PQRI is now codified as a permanent program. CMS is now authorized to make incentive payments to eligible professionals for reporting on applicable quality measures into the future. For 2009, the eligible professionals include certain mid-level practitioners, physicians, occupational therapists, qualified speech-language pathologists, and qualified audiologists. For 2009, the incentive for reporting equals two percent of allowed Medicare charges for all professional services furnished during the reporting period that are submitted within two months of the end of the reporting period. The reporting period for 2009 is defined as the entire calendar year (although if registry-based reporting is used, the professional has an alternative to report from July 1, 2009 to December 31, 2009 and still qualify for the bonus).

To qualify for the two-percent bonus, eligible professionals have several options available for reporting the data. The options differ based on whether the professional chooses a claims-based or registry-based approach, and whether the reporting pertains to individual measures or measure groups. The options available for claims-based submission of individual measures are the most restrictive. Registry-based reporting permits a physician to report through an authorized outside organization such as certain trade associations. Registry-based submission using several different options is permitted; for the 2008 PQRI, there are 32 registries qualified to submit quality measures on behalf of eligible professionals. Six options are available to a professional reporting on measure groups. The PFS Final Rule sets forth the process that registries must go through in order to be qualified to submit data for eligible professionals for the 2009 PQRI program.

CMS does not at this time accept quality data through electronic health record (EHR) submission; however, it intends to test EHR vendors and their products during 2009 to determine if EHR reporting can be used in the future. By December 31, 2008, CMS intends to post on its Web site a list of requirements that EHR vendors must meet in order to qualify to participate in the PQRI-testing process in 2009, “with anticipation that such vendors’ systems may be able to submit quality measure data in the future to CMS for PQRI on behalf of eligible professionals using the systems.”

In a significant departure from the PQRI programs of 2007 and 2008, CMS now indicates that it will report publicly the names of eligible professionals who report quality data satisfactorily for the 2009 PQRI. This information will be available in 2010 on a “Physician and Other Health Care Professional Compare” Web site. This means that physicians and other professionals can expect that, like hospitals, they will have individual quality data posted publicly in the future.

E-Prescribing Incentive Program

In an effort to encourage significant expansion of the use of electronic prescribing, MIPPA authorized a combination of financial incentives and payment differentials for prescribing practitioners. The financial incentives are available for 2009 through 2013, and the payment differentials take effect in 2012 and will apply in all subsequent years thereafter. For 2009, a “successful electronic prescriber” will be eligible to receive an incentive payment equal to two percent of total allowed charges for the reporting period. The incentive payments decrease in subsequent years and are eliminated entirely after 2013. Beginning in 2012, a payment differential takes effect that reduces the amount paid to a prescriber who does not use e-prescribing under the fee schedule by one percent. This amount increases in subsequent years to a maximum reduction of two percent by 2014.

Like PQRI, this incentive and payment differential applies to all eligible professionals, including physicians and other professionals defined by PQRI. However, eligibility is restricted to only those professionals who have prescribing authority, which may vary from state to state for certain types of practitioners based on scope of practice.

For 2009, the reporting period for e-prescribing is the calendar year (so long as the claims are submitted by February 2010). Unlike PQRI, reporting for the e-prescribing incentive can be done only through claims submission, and the PFS Final Rule provides detail on the claims-submission procedure. CMS also indicates that professionals have discretion in choosing the system they wish to use for e-prescribing; however, the system chosen must have the functionality established by the Medicare Part D e-prescribing standards.

There is a statutory limitation that applies to eligibility for the e-prescribing incentive. To qualify for the incentive, the reported code for e-prescribing must constitute at least 10 percent of the professional’s total Part B allowed charges. Congress enacted this limitation so that only those physicians or other eligible professionals who have the opportunity to prescribe a sufficient number of prescriptions can receive the incentive.

CMS also will include the names of eligible professionals who are successful electronic prescribers for the 2009 E-Prescribing Incentive Program on the Physician and Other Health Care Professional Compare Web site. This means that both successful PQRI reporters and successful electronic prescribers now will be reported publicly by 2010.

Hospital Outpatient Quality Data Reporting Program (HOP QDRP)

The OPPS Final Rule expanded upon the hospital reporting requirements for outpatient services and enacted a new program to reduce hospital outpatient payments by up to two percent if hospitals fail to meet the outpatient reporting requirements. Beginning in April 2008, hospitals were required to report on seven outpatient measures. Five of these measures apply to emergency departments and relate to acute myocardial infarction treatment, while two relate to outpatient surgery and the prevention of surgical infection. For FY 2009, CMS will expand the reporting requirement with four new imaging efficiency measures focused on magnetic resonance imaging of lumbar spine, mammography, abdominal computed tomography (CT), and thoracic CT, for a total of 11 measures for 2009 HOP QDRP reporting. The adequate reporting of these measures will be used to determine a hospital’s outpatient payment rates for FY 2010. The OPPS Final Rule also lists 18 different measures in nine measure sets from which additional quality measures could be selected for inclusion in HOP QDRP for FY 2011 and beyond.

The OPPS Final Rule explains the manner by which CMS will apply the two-percent reduction in OPPS payment rates, should a hospital fail to meet reporting requirements under HOP QDRP. The national unadjusted payment rates for many services paid under OPPS equal the product of the OPPS conversion factor and the scaled relative weight for the ambulatory payment classification (APC) to which the service is assigned. The OPPS conversion factor is updated annually, and CMS proposes to apply the two-percent reduction to the conversion factor for purposes of implementing the HOP QDRP payment adjustment. This means that the payment reduction for failing to report under HOP QDRP will only apply to those OPPS services that are adjusted annually based on the conversion factor. For CY 2009, the reduction would be determined by multiplying the full national unadjusted payment rate for the applicable current procedural terminology (CPT) code by 0.981.

Like the Reporting Hospital Quality Data Annual Payment Update (RHQDAPU) program, CMS intends that reporting under HOP QDRP will be made public and has stated that the data will be posted to the CMS Web site by 2010. Hospitals will have an opportunity to review the data prior to publication. CMS is exploring whether Hospital Compare or other sites might be used for reporting of HOP QDRP data.

Healthcare-Associated Conditions and Never Events

Part of the Value-Based Purchasing program already implemented by CMS includes a denial of payment for certain conditions considered to be preventable. In October 2008, CMS implemented its HAC payment penalty to further that initiative. Two recent developments signal CMS’ intent to expand its policy to deny payment when the condition leading to the need for health care is deemed reasonably preventable.

In the OPPS Final Rule, CMS discussed in detail its intent to expand its HAC program to outpatient hospitals and other settings. Coining the term “healthcare-associated conditions,” CMS is focused on outpatient departments, ambulatory surgical centers (ASCs), skilled nursing facilities (SNFs), home health agencies, and other settings where preventable conditions can arise. Although no definitive policy changes were adopted in the OPPS Final Rule, CMS made clear that it views the ongoing problem of preventable healthcare-associated conditions in outpatient settings as a key Value-Based Purchasing strategy. This issue likely will be included in the joint IPPS/OPPS listening session that CMS intends to schedule this winter. 

CMS has taken its focus on never events in a different direction. Instead of including certain never events among the HACs for which it currently denies payment if not present on admission, CMS has proposed three NCDs to prevent payment for serious medical errors. The three NCDs released on December 2, 2009 address:

  • Wrong surgical or other invasive procedures performed on a patient
  • Surgical or other invasive procedures performed on the wrong body part  
  • Surgical or other invasive procedures performed on the wrong patient

By using the NCD approach, the payment denial policy will extend beyond inpatient hospital care to physicians, hospital outpatient departments, and all other health care providers or suppliers that may be involved. CMS is accepting comment on the proposed NCDs with the goal of releasing them in final form by March 2009.

As the foregoing developments indicate, CMS continues to pursue aggressive strategies to tie payment to quality. It is expanding the scope of these Value-Based Purchasing efforts to new settings and types of providers, while expanding the number of measures used to monitor quality.


Legal News Alert is part of our ongoing commitment to providing up-to-minute information about pressing concerns or industry issues affecting our health care clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:





Janice A. Anderson
Chicago, Illinois

Nathaniel M. Lacktman
Tampa, Florida

Michael Scarano
San Diego/Del Mar, California

Cheryl L. Wagonhurst
Los Angeles, California






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