Brian Foy, VP, Product Development, Q-Centrix

The government has long made it clear that it wants to use its purchasing power to improve the way hospitals handle patient safety. When the new rules for fiscal year 2015 come into place in October, its intent will become reality. If you add up the potential lost incentives and penalties hospitals face over the next few years, they are looking at sums higher than their profit margin. In other words, those who don’t adapt, won’t survive the new realities!

Two programs are starting to explicitly link patient safety to dollars. The first, value-based purchasing (VBP), works by withholding a share of reimbursement fees which is funnelled as incentives to those hospital systems that improve and perform better than an average benchmark on a number of criteria. Over the past two years, the program has largely measured processes, but it is rapidly shifting its focus to outcomes and efficiency, with patient safety looming large. In the current fiscal year, VBP introduced mortality risk reduction. From October, it will also start to measure readmissions and two major hospital acquired conditions (HACs), adding more in October 2015.

In theory, every hospital can reach the fed’s benchmarks to receive a VBP incentive, but the government still first withholds 1.5% of fees – an estimated total $1.4bn – from the 3,000-plus hospitals in its program. By 2017, hospitals stand to lose 2% of their revenue if they don’t meet the benchmarks.

The second program, introduced in October and focusing exclusively on HACs, is completely punitive. The HAC Reduction program imposes a blanket 1% penalty for the bottom quarter of hospitals – no matter how much they have improved on broad measure of HAC criteria. CMS estimates that more than 750 hospitals will lose a combined $330 million in payments in the coming year.

Some complain that the government is imposing a double jeopardy on hospitals, handing out both competitive penalties and bonuses for the same performance criteria. To an extent they are right, but it is a clear and intentional signal to the market that they need to take a systematic approach to patient safety. Hospitals that find a way to break out of the vicious cycle of infections and readmissions, and create a virtuous cycle by enforcing effective policies and procedures, will now reap financial returns as well as improving care.


 

Brian Foy spent most of his career with strategic accountability for software applications in the health information technology (HIT) space. At TransUnion Healthcare and later, at Altegra Health, Brian led a Healthcare Analytics application through an acquisition while overseeing the addition of key quality reporting and care management features. At Blue Cross Blue Shield of Illinois (HCSC), Brian oversaw the implementation of a care and condition management reporting system, which fulfilled a key gap in that company’s care management product offering. Brian has an MA in Health Services Administration from Xavier University in Cincinnati, Oh, and a BA in Economics from Ohio University in Athens, Oh.