About 55% of hospitals earned Medicare incentive payments in fiscal 2019 compared with fiscal 2018, when 57% of the hospitals did, or just under 1,600.
The program, which kicked off in 2012 as mandated under the Affordable Care Act’s efforts to move away from fee-for-service, ties hospitals’ Medicare reimbursement dollars to how well they perform and improve on various quality measures.
The CMS imposes a 2% reduction to base diagnosis-related group payments for about 2,800 hospitals paid under the Inpatient Prospective Payment System. Medicare redistributes that money to hospitals that receive high scores in four areas: clinical care; safety; person and community engagement; and efficiency and cost reduction. Each domain accounts for 25% of the total hospital score.
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Similar to last year, about $1.9 billion will be awarded to hospitals in the form of value-based payments in fiscal 2019. The program is paid through a 2% reduction in all payments and is budget-neutral, meaning the highest-performing hospitals can earn back bonuses greater than the payment reduction, while others may receive small or no payment increases.
For about 60% of the hospitals, the changes to their DRG payments will be small, in the range of plus or minus 0.5%. The average net payment adjustment is 0.17%. The highest-performing hospital in fiscal 2019 will receive a payment increase of 3.67% while the lowest-performing hospital’s payment will be cut by 1.59%, according to the CMS.
Even though slightly fewer hospitals received bonuses, the average performance scores across all the hospitals in fiscal 2019 improved from last year. The average total performance score was 38.1, a slight increase from fiscal 2018 when the average score was 37.4.