PPACA Will Drive Quality Health Care Reform

21 May 2010 Publication
Author(s): Robert D. Sevell Lawrence W. Vernaglia

Legal News Alert: Health Care

Driven by years of widespread and highly publicized quality of care concerns and the pressing need to contain health care costs, the Patient Protection and Affordable Care Act (PPACA) contains numerous measures that seek to improve the quality of medical care while also lowering the rate of growth of health care expenditures. Through a myriad of initiatives such as the creation of innovative payment and delivery models, value-based purchasing programs, quality reporting, and the establishment of the Center for Medicare and Medicaid Innovation (CMI), PPACA provides models for how incentives that reward and encourage collaboration, integration, efficiency, and higher quality of care can be implemented on a large scale. Below is a summary of some of the more significant quality initiatives introduced through this historic legislation.

Payment Changes

Hospital Value-Based Purchasing Program
Congress directed the Secretary of Health & Human Services to establish a hospital value-based purchasing program (the Program). Under the Program, value-based incentive payments will be made to hospitals that meet (or exceed) performance standards set forth by the Secretary. The Program will begin in FY 2013 and will apply to payments for discharges occurring on or after October 1, 2012. For FY 2013, the Secretary shall select measures that cover at least the following five specific conditions or procedures: (1) acute myocardial infarction (AMI); (2) heart failure; (3) pneumonia; (4) surgeries; and (5) health care-associated infections. Beginning in FY 2014 and thereafter, the measures selected must include efficiency measures, including measures of Medicare spending per beneficiary. Such measures must be adjusted for factors such as age, sex, race, severity of illness, and other factors that the Secretary determines appropriate.

The Secretary is directed to establish performance standards with respect to the aforementioned measures, which must include levels of achievement and improvement. In addition, the Secretary must develop a methodology for assessing the total performance of each hospital based on such performance standards. The value-based incentive payment amount for each hospital discharge in a fiscal year will be equal to the product of the base operating diagnosis-related group (DRG) payment amount for the discharge for the hospital for such fiscal year and the value-based incentive payment percentage specified by the Secretary for a hospital for a fiscal year. Further, the Secretary is directed to make information available to the public regarding the performance of individual hospitals under the Program. The Secretary must, to the extent practicable, and with input from other stakeholders, take steps to ensure that the measures are coordinated and aligned with quality measures applicable to physicians and other provider of services and suppliers.

Value-Based Payment Modifier Under the Physician-Fee Schedule
PPACA directs the Secretary to establish a budget-neutral payment modifier that provides for differential payment to a physician or a group of physicians based upon the quality of care furnished compared to cost. The modifier must be separate from geographic factors. The Secretary is further directed to establish appropriate, risk-adjusted measures of the quality of care furnished by a physician or group of physicians to individuals such as measures that reflect health outcomes. The measures are to be published no later than January 1, 2012. The Secretary will apply the payment modifier in two phases: (1) beginning on January 1, 2015, for specific physicians and groups of physicians, and (2) on January 1, 2017, for all physicians and groups of physicians. The Secretary also must coordinate the value-based payment modifier with the Physician Feedback Program, a program established under the Social Security Act under which the Secretary uses Medicare claims data to provide confidential reports to physicians that measure the resources involved in furnishing care to individuals.

Payment Adjustment for Conditions Acquired in Hospitals — Now Applicable to Both Medicare and Medicaid
Beginning in 2015, in order to provide an incentive for hospitals to reduce hospital-acquired conditions (HACs), Medicare will reduce payment for discharges to 99 percent of the amount that would otherwise apply, for hospitals in the top quartile (25 percent) of all hospitals, relative to the national average, of HACs. PPACA directs the Secretary to provide confidential reports to the applicable hospitals with respect to HACs and to make information regarding HACs of each applicable hospital available to the public.

PPACA further directs the Secretary to conduct a study and submit a report to Congress by January 1, 2012, on expanding the HAC policy to payments made to other facilities under the Medicare program, including: inpatient rehabilitation facilities, long-term care hospitals, skilled nursing facilities (SNFs), ambulatory surgical centers (ASCs), and health clinics. The study must include an analysis of how such policies could impact quality of patient care, patient safety, and spending under the Medicare program.

With respect to Medicaid, effective July 1, 2011, PPACA prohibits Medicaid payment for any medical assistance provided for HACs as identified in the Secretary’s regulations. The Secretary’s regulations must ensure that the prohibition of payment for HACs will not result in a loss of access to care or services for Medicaid beneficiaries.

Hospital Readmissions Reduction Program
Beginning with hospital discharges on or after October 1, 2012, Medicare will reduce payments to hospitals found to have an "excess readmissions ratio" for three conditions. Beginning in 2015, the Secretary is required, to the extent practicable, to include additional conditions beyond the three. A readmission would include the admission of the individual to the same or another hospital within a specified time period. In addition, the Secretary is to calculate and make publically available on the Web, information on hospital readmission rates for certain conditions. Prior to implementation of the program, the Secretary is required to make available a program for eligible hospitals to improve their readmission rates through the use of patient safety organizations.

Community-Based Care Transitions Program
In addition to the Hospital Readmissions Reduction Program, the new law requires the Secretary to establish a Community-Based Care Transitions Program that will provide funding to hospitals and community-based organizations that furnish improved care transitions services to individuals with certain chronic conditions or other risk factors associated with hospital readmission or substandard transition into post-hospitalization care. Examples may include cognitive impairment, depression, a history of multiple readmissions, and/or any other chronic disease or risk factor determined by the Secretary. In selecting eligible entities to participate in the program, priority is to be given to entities that participate in a program administered by the Administration on Aging to provide concurrent care transitions interventions with multiple hospitals and practitioners and entities that provide services to medically underserved populations, small communities, and rural areas.

Plans for a Value-Based Purchasing Program for SNFs, Home Health Agencies, and ASCs
PPACA directs the Secretary to develop a plan to implement a value-based purchasing program for payments under Medicare for each of the following: (1) SNFs; (2) home health agencies; and (3) ASCs. In developing the plans, the Secretary must consult with relevant affected parties and must consider experience with such demonstrations that the Secretary determines are relevant to the value-based purchasing program. The plan for ASCs must be submitted in a report to Congress no later than January 1, 2011, and the plans for SNFs and home health agencies no later than October 1, 2011

Reporting Requirements

Improvements to the Physician Quality Reporting (PQR) Program
Payment incentives will be extended to physicians who report quality data to Medicare under the PQR program through 2014 (from 2010). Beginning in 2015, Medicare payments will be reduced for physicians who do not submit data on quality measures for covered professional services. PPACA directs the Secretary to develop a plan, no later than January 1, 2012, to integrate reporting on quality measures under this subsection with reporting requirements related to the meaningful use of electronic health records (EHR). The integration shall consist of the selection of measures, the reporting of which would both demonstrate meaningful use of EHR and quality of care furnished to an individual. The Secretary also must provide timely feedback to eligible professionals on the performance of the eligible professional with respect to satisfactorily submitting data on quality measures. PPACA further directs the Secretary to establish and have in place an informal process for eligible professionals to seek a review of the determination that an eligible professional did not satisfactorily submit data on quality measures, by no later than 2011.

For 2011 through 2014, PPACA provides for an additional incentive payment of 0.5 percentage points for physicians who satisfactorily submit data on quality measures for a year through a Maintenance of Certification Program. In addition, the physicians must participate in such a Maintenance of Certification Program for a year and must successfully complete a Maintenance of Certification Program practice assessment. Beginning in 2014, the Secretary may incorporate participation in a Maintenance of Certification Program and successful completion of a Maintenance of Certification Program practice assessment into the composite of measures of quality of care, if the Secretary deems it appropriate.

Quality Reporting for Long-Term Care Hospitals (LTCHs), Inpatient Rehabilitation Hospitals (IRFs), Psychiatric Hospitals, and Hospice Programs
Beginning in 2014, LTCHs, IRFs, psychiatric hospitals, and hospice programs must submit data on quality measures to the Secretary. The Secretary is required to publish the measures before October 1, 2012. Failure to submit data to the Secretary will result in a reduction by two percentage points to any annual update to a standard federal rate for discharges for LTCHs, IRFs, psychiatric hospitals, and hospice programs. The Secretary must establish procedures for making the data available to the public and must report on the CMS Web site quality measures that relate to services furnished in inpatient settings in LTCHs, IRFs, psychiatric hospitals, and hospice programs.

Quality Reporting for Prospective Payment System (PPS)-Exempt Cancer Hospitals
Beginning in 2014, the 11 PPS-exempt cancer hospitals also must submit data on quality measures to the Secretary. The Secretary is required to publish the measures before October 1, 2012. Additionally, the Secretary must establish procedures for making the data available to the public and must report on the CMS Web site quality measures of process, structure, outcome, patients’ perspective on care, efficiency, and costs of care that relate to services furnished in PPS-exempt cancer hospitals.

Data Collection and Public Reporting
New government efforts in collecting quality and utilization data are expected in the wake of PPACA. The Secretary will collect and aggregate consistent data on quality and resource-use measures for information systems used to support health care delivery to implement the public reporting of performance information. The Secretary is required to ensure that such collection, aggregation, and analysis systems span an increasingly broad range of patient populations, providers, and geographic areas over time. The Secretary may award grants or contracts to entities to support new or improve existing efforts to collect and aggregate quality and resource use measures. PPACA authorizes sums to be appropriated as necessary for fiscal years 2010 through 2014.

Improvements to the Physician Feedback Program
Physicians can expect new reports from CMS derived from Medicare claims payment data. Under the Physician Feedback Program, PPACA directs the Secretary to use claims data (and other data) to provide confidential reports to physicians (and to groups of physicians if determined appropriate by the Secretary) that measure the resources involved in furnishing care to individuals. PPACA also requires the Secretary to develop, no later than January 1, 2012, an episode grouper that combines separate but clinically related items and services into an episode of care for an individual, as appropriate. Beginning in 2012, PPACA directs the Secretary to provide reports to physicians that compare patterns of resource use of the individual physician to such patterns of other physicians. The Secretary must make appropriate adjustments to account for differences in socioeconomic and demographic characteristics, ethnicity, and health status of individuals (such as to recognize that less healthy individuals may require more intensive interventions) and to eliminate the effect of geographic adjustments in payment rates.

Adult Health Quality Measures
PPACA directs the Secretary to identify and publish for comment before January 1, 2011, a recommended core set of adult health quality measures for Medicaid eligible adults. An initial core set must be published no later than January 1, 2012. Further, by January 1, 2013, the Secretary must consult with states to develop a standardized format for reporting information based on the initial core set of adult health quality measures and create procedures to encourage states to use such measures to voluntarily report information

Demonstration/Pilot Projects

National Pilot Program on Payment Bundling
By no later than January 1, 2013, and for five years thereafter unless extended, the Secretary must establish a pilot program that will encourage hospitals, physicians, and post-acute providers to provide integrated care during, and be jointly accountable for an episode of care beginning three days prior to, an inpatient admission and continuing for 30 days following discharge. Under the program, providers will receive a bundled payment for eight conditions selected by the Secretary. In selecting conditions, the Secretary is to consider the following factors: (1) whether the conditions include a mix of chronic and acute conditions; (2) whether the conditions include a mix of surgical and medical conditions; (3) whether the conditions provide an opportunity for providers and suppliers to improve the quality of care furnished, while reducing total expenditures; (4) whether the conditions have sufficient variation in the number of readmissions and amount of post-acute care spending; and (5) which conditions are most amenable to bundling.

The bundled payment will be comprehensive, covering payment for the furnishing of applicable services and other appropriate services such as care coordination, medication reconciliation, discharge planning, transitional care services, and other patient-centered activities. Providers participating in the pilot are required to submit data to the Secretary on certain quality measures established by the Secretary. At a minimum, these quality measures must include:

  • Measures of functional status improvement
  • Reduction in avoidable hospital readmissions
  • Rates of discharge to the community
  • Rates of admission to an emergency room after hospitalization
  • Incidence of health care acquired infections
  • Efficiency
  • Patient-centeredness of care
  • Patient perceptions of care
  • Other measures determined by the Secretary

The Secretary must conduct an independent evaluation of the program to determine the extent to which it reduced spending and improved quality, health outcomes, and access to care.

This bundling concept is similar to the DRG-payment model Medicare currently utilizes, however, it would be an expansion of such payments to include all services provided to a patient during the episode of care. Under the fee-for-service model, doing more is rewarded even if it does not improve quality. In fact, in some cases medical errors result in additional payment when additional services become necessary to correct clinical mishaps. The hope is that bundling payments for specific procedures will encourage providers to work together, reduce duplication of services and procedures, and incentivize hospitals, physicians, and other providers to improve the quality and efficiency of care received by patients.

Quality Improvement Technical Assistance and Implementation Grants
Under PPACA, the Center for Quality Improvement and Patient Safety of the Agency for Healthcare Research and Quality (Center) is authorized to award grants and contracts to eligible entities to assist in understanding, adapting, and implementing models and best practices identified through the Center’s research. To qualify for grants or contracts, an entity must have demonstrated expertise in providing information and technical support and assistance to health care providers regarding quality improvement. In addition, the entity must agree that it will make non-federal contributions toward the activities to be carried out under the grant or contract in an amount equal to $1 for every $5 of federal funds provided. Such non-federal matching may be provided directly or through donations from public or private entities. The performance of each entity receiving a grant or contract will be evaluated to determine if the entity achieves implementation of the models and practices identified in the Center’s research, the perception of the health care institutions and providers assisted by such entity regarding the value of the entity, and where practicable, if better patient outcomes and lower cost result from the assistance provided by such entity. The determination whether to renew a grant or contract will be based upon this evaluation. Entities receiving a grant or contract also are required to coordinate with health information technology centers and the primary care extension programs regarding the dissemination of quality improvement, system delivery reform, and best practices information.

New Government Programs

Medicare Shared Savings Program — Accountable Care Organizations (ACOs). In one of the most anticipated elements of health reform, the Secretary is to establish, by no later than January 12, 2012, a shared savings program that allows qualifying providers organized as an ACO to share in the cost savings they achieve. A wide variety of professionals may form an ACO, including physicians and other health care practitioners; networks of group practices; partnerships or joint venture arrangements between hospitals and professionals; hospitals employing professionals; and other groups of providers as the Secretary deems appropriate.

ACOs must:

  • Take responsibility for the quality, costs, and overall care of the patients assigned to the ACO
  • Enter into an agreement with the Secretary to participate in the program for no less than three years
  • Have a formal legal structure that allows the ACO to receive and distribute payments for shared savings
  • Have a sufficient number of primary care professionals
  • Have at least 5,000 beneficiaries
  • Have a leadership and management structure that includes clinical and administrative systems
  • Have defined processes to promote evidenced-based medicine and patient engagement, report quality and cost measures, and coordinate care through tele-health, remote patient monitoring, and other enabling technologies
  • Meet patient-centered criteria established by the Secretary

While there is little doubt that clinical integration and the right financial incentives will lead to higher quality and more efficient care, providers must carefully structure their ACOs in order to avoid violations under the Anti-Kickback Statute, Stark law, corporate practice of medicine prohibitions, antitrust restrictions, and other applicable laws.

Center for Medicare and Medicaid Innovation
PPACA creates a new CMI. By no later than January 1, 2011, the CMI must begin testing innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care furnished to patients. Included among the models the CMI will test are:

  • Patient-centered medical homes that transition primary care practices away from fee-for-service based reimbursement and toward comprehensive payment or salary-based payment
  • Direct contracting with provider groups to promote innovative care delivery models
  • Utilization of geriatric assessments and comprehensive care plans to coordinate care for individuals with multiple chronic conditions and an inability to perform two or more activities of daily living or a cognitive impairment such as dementia
  • Care coordination for chronically ill patients at high risk of hospitalization through the use of health information technology-enabled provider networks including care coordinators, a chronic disease registry, and home tele-health technology
  • Community-based health teams to support small-practice medical homes by assisting primary care practitioners in chronic care management
  • Assisting individuals in making informed health care choices by paying providers for using patient decision support tools
  • Allowing states to test and evaluate systems of all-payer payment reform for the medical care of residents
  • Aligning nationally recognized, evidence-based guidelines of cancer care with payment incentives
  • Improving post-acute care through continuing care hospitals
  • Funding home health care providers who offer chronic care management services in cooperation with interdisciplinary teams
  • The development of a collaborative of high-quality, low-cost health care institutions responsible for developing, documenting, and disseminating best practices and proven care methods and implementing and assisting other institutions in implementing such best practices and care methods

The Secretary is required to evaluate each model based upon an analysis of the quality of care furnished, including a measurement of patient-level outcomes and patient-centeredness criteria the Secretary deems appropriate as well as the changes in spending resulting from the models. Beginning in 2012 and every other year thereafter, the Secretary must submit a report to Congress that, among other things, provides recommendations for legislative action to facilitate the development and expansion of successful payment models.

National Strategy for Quality Improvement in Health Care
PPACA directs the Secretary to establish, through an “open and transparent process,” a national strategy to improve the delivery of health care services, patient health outcomes, and population health. In developing the strategy, the Secretary must identify national priorities for improvement that will meet specified requirements/goals such as:

  • Improving federal payment policy to emphasize quality and efficiency
  • Addressing the health care provided to patients with high-cost chronic diseases
  • Reducing health disparities across populations and geographic areas
  • Having the greatest potential for improving the health outcomes, efficiency, and patient-centeredness of health care for all populations, including children and vulnerable populations

The strategy must be updated annually.

Interagency Working Group on Health Quality
The president will convene the Interagency Working Group, composed of senior level representatives of numerous federal agencies. The goals of the Working Group include:

  • Collaborating, cooperating, and consulting to develop and disseminate strategies, goals, models, and timetables that are consistent with the national strategy
  • Avoiding inefficient duplication of quality improvement efforts and resources by creating a streamlined process for quality reporting and compliance requirements
  • Assessing alignment of quality efforts in the public sector with private sector initiatives

A report describing the Working Group’s progress and recommendations is due to Congress by December 31, 2010, and annually thereafter.

Quality Measure Development
In consultation with the Director of the Agency for Healthcare Research and Quality and the Administrator of CMS, the Secretary must identify gaps where no quality measures exist and existing quality measures that need improvement, updating, or expansion, consistent with the national strategy. The Secretary must make available to the public on a Web site, a report on any gaps identified and the process used to make the identification. The Secretary is further directed to award grants, contracts, or intergovernmental agreements to eligible entities for purposes of developing, improving, updating, or expanding the quality measures identified. PPACA authorizes the appropriation of $75 million for fiscal years 2010 through 2014 for carrying out this section.

Quality Measurement
PPACA directs a consensus-based entity to convene multi-stakeholder groups, composed of a voluntary collaborative of organizations representing a broad group of stakeholders interested in or affected by the use of such quality measures, to provide input to the Secretary on national priorities and on the selection of quality measures. The Secretary is directed to take into consideration the input from the multi-stakeholder groups in selecting quality measures and must publish in the Federal Register the rationale for the use of any quality measure that has not been endorsed by the entity. The Secretary is further directed to review quality measures, no less often than every three years, to determine whether to maintain the use of such measure or to phase out such measure. PPACA authorizes the transfer of $20 million from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust fund to CMS for fiscal years 2010 through 2014 for carrying out this section.

As the foregoing indicates, PPACA contains numerous mechanisms and incentives designed to improve health outcomes and delivery systems. While PPACA sets the stage for quality reform, there is much to be done. Providers, suppliers, and other players in the health care industry will need to ensure that they have the proper mechanisms in place required by these initiatives. They should obtain the necessary guidance to successfully navigate through the legal, political, and practical implications of these historic changes.

Legal News Alert is part of our ongoing commitment to providing up-to-the-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:

Rachelle (Shelly) R. Hart
Milwaukee, Wisconsin

Renate M. Gray
Milwaukee, Wisconsin

Lawrence W. Vernaglia
Boston, Massachusetts

Michael Scarano
San Diego, California

Robert D. Sevell
Los Angeles, California

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