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This is the seventh in a series of Alerts by Center for Medicare Advocacy regarding the Patient Protection and Affordability Care Act of 2010 (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA). This Alert focuses on changes in PPACA that address measuring the quality of care that is received by Medicare beneficiaries, and linking payment to those measures.

In reviewing these materials, it is important to keep in mind that Congress has placed emphasis on efforts to measure quality and to provide payment for only those services and procedures that meet certain quality of care standards. [1] As the provisions indicate, measuring quality and obtaining agreement on standards and norms of treatment for quality measurement is a complex and emerging activity.

As a further introduction to the language and terminology of quality, quality measurement and systems delivery, you may want to read our recent article on delivery systems at:

PPACA § 3001. Hospital Value-Based Purchasing Program. Pursuant to this section of the law, the Secretary of Health and Human Services (HHS) is to establish a value-based purchasing program, under which incentive payments are to be made to hospitals. The incentive is to be in the form of a percentage add-on to the base operating Diagnostic Related Group (DRG) payment per discharge in each fiscal year. The program begins in fiscal year 2013 and applies to payments for hospital discharges occurring on or after October 1, 2012.

Measures selected to qualify for incentive payments for fiscal year 2013 will cover the following five specific conditions:

  • Acute myocardial infarction;

  • Heart failure;

  • Pneumonia;

  • Surgeries (as measured by the Surgical Care Improvement Project); and

  • Healthcare-associated infections.

The program excludes any hospital:

  • Which has not submitted the required data to HHS;

  • Which has been cited by HHS for deficiencies that pose immediate jeopardy to the health or safety of patients;

  • For which there are no minimum number of measures that apply for the performance period; or

  • For which there are not a minimum number of cases for the measures that apply for the performance period under review.

HHS is to conduct a study on the performance of the hospital value-based purchasing program and is to include:

  • Ways to improve the program;

  • Ways to address any unintended consequences;

  • The appropriateness of the Medicare program's sharing in any savings generated through the hospital value-based purchasing program; and

  • Any other area determined appropriate by HHS.

The report to Congress of the study's findings is due no later January 1, 2016.

PPACA § 3002. Improvements to the Physician Quality Reporting System. Pursuant to this section of the law, professionals able to receive Medicare payment, including allied healthcare providers, who do not comply with reporting requirements, will have their payments reduced. For 2015, the penalty for failure to submit data is a reduction in payment to 98.5% of the fee scheduled amount, and for 2016 and subsequent years, the penalty is a reduction to 88% of the fee-scheduled amount.

No later than January 1, 2011, HHS is to establish an appeals process for eligible professionals to seek review of a determination that the professional did not satisfactorily submit data on quality measures as required.

Reporting can also be accomplished through a Maintenance of Certification program operated by a specialty body of the American Board of Medical Specialties that meets certain criteria. The maintenance of certification provisions apply for years after 2010. Not later than January 1, 2012, HHS must develop a plan to integrate reporting on quality measures and Electronic Health Record (EHR) reporting related to the meaningful use of electronic health records.

PPACA § 3003. Improvements to the Physician Feedback Program. Under this provision HHS must use claims data (and other data) to provide confidential reports to physicians (and, as determined appropriate by HHS, to groups of physicians) that measure the resources involved in furnishing care to individuals under the Medicare program. Beginning in 2012, HHS must provide reports to physicians that compare, as determined appropriate by HHS, patterns of resource use by an individual physician to patterns of use by other physicians.

PPACA § 3004. Quality Reporting for Long-Term Care Hospitals, Inpatient Rehabilitation Hospitals, and Hospice Programs. Starting in 2014, this section of the law requires that the annual update to the standard federal rate for discharges during the rate year will be reduced by 2 percentage points for each facility that does not report quality data. Not later than October 1, 2012, HHS must publish the measures selected that will be applicable to rate year 2014. HHS must establish procedures for making available to the public data submitted under this provision.

PPACA § 3005. Quality for PPS-Exempt Cancer Hospitals. For fiscal year 2014 and each subsequent year, a PPS-Exempt Cancer hospital must submit quality data in accordance with the requirements of HHS. Not later than January 1, 2012, HHS must publish the measures of quality of care, costs to be reported and the dates of implementation of the reduction in payment due to failure to report required data ("payment modifier"). HHS must begin initial implementation of the payment modifier through the rule-making process during 2013. No later than October 1, 2011, HHS must submit to Congress its plan for developing its value-based purchasing program for PPS-Exempt Cancer Hospitals .

PPACA § 3006. Plans for a Value-Based Purchasing Program for Skilled Nursing Facilities and Home Health Agencies. The law requires HHS to develop a plan to implement a value-based purchasing program for payments under Medicare's skilled nursing facility and hospice programs. Not later than October 1, 2012, HHS must publish the measures selected with respect to fiscal year 2014, including procedures for the public to review such data. The measures, to the extent feasible and practicable, must extend to all dimensions of quality and efficiency in skilled nursing facilities and hospices.

PPACA § 3007. Value-based Payment Modifier Under the physician Fee Schedule. This provision establishes a value-based payment modifier to provide for differential payment to a physician or a group of physicians under the fee schedule based upon the quality of care furnished compared to cost during a performance period. The payment modifier is to be implemented in a budget-neutral manner. HHS is to coordinate the value-based payment modifier with the Physician Feedback Program.

Not later than January 1, 2012, HHS must publish the measures of quality of care, the costs and the dates for implementation of the payment modifier and initial performance period. HHS must begin implementing the payment modifier through the rulemaking process during 2013. In addition, HHS must specify an initial performance period for application of the payment modifier for 2015. Beginning January 1, 2015, HHS must apply the payment modifier to specific physicians and groups of physicians as determined by HHS. Beginning not later than January 1, 2017, HHS must apply the modifier to all physicians and groups of physicians.

PPACA § 3008. Payment Adjustment for Conditions Acquired in Hospitals. The law requires HHS to create incentives for applicable hospitals that receive inpatient hospital service payments on the basis of prospective rates as set by the Medicare Geographical Classification Review Board. The incentives are meant to reduce hospital acquired conditions with respect to discharges occurring during fiscal year 2015 and subsequent fiscal years. The amount of payment for such discharges during the fiscal year must be equal to 99 percent of the amount of payment that would otherwise apply. An applicable hospital is one that is in the top quartile of hospitals relative to the national average of hospital acquired conditions during the applicable period, as determined by HHS. The term 'hospital acquired condition' means a condition identified or determined by HHS that an individual acquires during a stay in an applicable hospital. The term 'applicable period' means, with respect to a fiscal year, a period specified by HHS.

Prior to fiscal year 2015 and in each subsequent fiscal year, HHS must provide confidential reports to applicable hospitals with respect to their hospital acquired conditions and make information available to the public regarding hospital acquired conditions of each applicable hospital. Information for the public shall also be posted on the Hospital Compare Internet website.

HHS must conduct a study on expanding the healthcare acquired conditions policy to payments made to other facilities under the Medicare program. The report, together with recommendations, is to be submitted to Congress not later than January 1, 2012.


PPACA § 3011. National Strategy. This provision requires HHS, through a transparent collaborative process, to establish a national strategy to improve the delivery of health care services, patient health outcomes, and population health. The strategy is to be updated not less than annually. Any such update must include a review of short- and long-term goals. HHS must submit the strategy to relevant congressional committees by not later than January 1, 2011. Also not later than January 1, 2011, HHS must create a website to make public information regarding the national priorities for health care quality improvement; the agency-specific strategic plans for health care quality; and other information, as HHS determines appropriate. The national strategy must include a comprehensive strategic plan to achieve the priorities described above.

PPACA § 3012. Interagency Working Group on Health Care Quality. The President must convene a working group to be known as the Interagency Working Group on Health Care Quality (referred to in this section as the ''Working Group''). The goals of the Working Group are to achieve collaboration, cooperation, and consultation between Federal departments and agencies with respect to developing and disseminating strategies, goals, models, and timetables that are consistent with the national priorities identified above. Not later than December 31, 2010, and annually thereafter, the Working Group must submit to the relevant Committees of Congress, and make public on a website, a report describing the progress and recommendations of the Working Group.

PPACA § 3013. Quality Measure Development. At least every three years,HHS, the Director of the Agency for Healthcare Research and Quality (AHRQ) and the Administrator of the Centers for Medicare & Medicaid Services (CMS) must identify gaps where no quality measures exist as well as existing quality measures that need improvement, updating, or expansion (consistent with the national strategy for health care quality, to the extent available) for use in Federal health programs. HHS must make available to the public on an Internet website a report on any gaps identified and the process used to make such identification.

PPACA § 3014. Quality Measurement. This provision establishes the new duties of the consensus-based entity for quality measurement, including obtaining multi-stakeholder group input through the convening of multi-stakeholder groups. The process must be open and transparent. Not later than February 1 of each year (beginning in 2012), the entity must transmit to HHS the input of multi-stakeholder groups.

Not later than December 1 of each year (beginning in 2011), HHS must make available to the public a list of quality measures under consideration. Not later than February 1 of each year (beginning in 2012), the consensus-based entity must transmit to HHS the input of multi-stakeholder groups. Not later than March 1, 2012, and at least once every three years thereafter, HHS must conduct an assessment of the quality impact of the use of endorsed measures and make such assessment available to the public.

PPACA § 3015. Data Collection, Public Reporting. The law requires HHS to collect and aggregate consistent data on quality and resource use measures used to support health care delivery. These data are to be used to implement the public reporting of performance information. HHS may award grants or contracts for this purpose.

HHS must ensure that collection, aggregation, and analysis systems span an increasingly broad range of patient populations, providers, and geographic areas over time. To carry out this work, such sums as may be necessary for fiscal years 2010 through 2014 are authorized to be appropriated. HHS must make available to the public, through standardized Internet websites, performance information summarizing data on quality measures.


It is important that advocates learn these new quality requirements and use them to advocate for quality health care for their clients. As the material from PPACA summarized above indicates, quality care and measurement will increasingly define healthcare payments and delivery in the years ahead.

[1]See, Changes To Medicare Advantage Plans And Prescription Drug Plans Under Health Care Reform, April 8, 2010, for a discussion of quality bonus payments for Medicare Advantage plans.


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