Final Rule Summary. Medicare Hospital Value-Based Purchasing Program Federal Fiscal Years 2013 and 2014

Final Rule Summary Medicare Hospital Value-Based Purchasing Program Federal Fiscal Years 2013 and 2014 April 2012

TABLE OF CONTENTS Overview... 1 Quality Measures Selected for the Hospital VBP Program... 2 Baseline and Performance Periods Used to Assess Hospital Performance under the Hospital VBP Program... 3 National Performance Standards for the Hospital VBP Program... 4 Scoring Methodology for the Hospital VBP Program... 6 Calculating Overall Domain Scores, Domain Weighting, and Calculating a TPS under the Hospital VBP Program... 10 VBP Payment Adjustments under the Hospital VBP Program... 11 Minimum Requirements and Exclusions under the Hospital VBP Program... 12 Notification of VBP Payment Adjustments under the Hospital VBP Program... 13 Public Reporting of VBP Scores and Incentive Payments under the Hospital VBP Program... 14 Review and Correction Process... 14 Reconsideration and Appeals Procedures... 15 If you have any questions about this summary, contact Kathy Reep, FHA Vice President/Financial Services, by email at kathyr@fha.org or by phone at (407) 841-6230.

OVERVIEW The Affordable Care Act (ACA) of 2010 mandates the implementation of an inpatient hospital value-based purchasing (VBP) program. The VBP program is a pay-for-performance program that links Medicare payment to quality performance for acute care hospitals paid under the inpatient prospective payment system (IPPS). Under the VBP program, using a subset of the quality data reported from the hospital Inpatient Quality Reporting (IQR) program grouped into quality domains, hospitals can earn points towards a Total Performance Score (TPS). The TPS will serve as the basis for determining a hospital s VBP payments or gain/loss under the program. In calculating the TPS, the scoring methodology provides points to hospitals that achieve high quality standards as well as points to hospitals that improve in the quality measures evaluated. As required by the ACA, a pool of funds, to be redistributed to hospitals based on their TPS, will be funded through an across-the-board reduction to Medicare IPPS base operating payments. The reduction is scheduled to be 1.0 percent in federal fiscal year (FY) 2013, increasing by 0.25 percent each year until the reduction reaches 2.0 percent for federal FY2017 and subsequent years. The VBP program applies to all subsection (d) inpatient hospitals all hospitals paid under the IPPS. Critical Access Hospitals (CAHs) and small hospitals with insufficient numbers of measures and/or cases are excluded from the program. The program does not apply to psychiatric, rehabilitation, long-term care, children s, and cancer hospitals, or hospitals in Maryland and Puerto Rico. Complete program policies and measures to be used for the first two program years, federal fiscal years 2013 and 2014, have been adopted by the Centers for Medicare & Medicaid Services (CMS) and are described in the summary below. Additional details on the program policies adopted by CMS can be found in the following Federal Registers: May 6, 2011, Federal Register Medicare Hospital Inpatient Value-Based Purchasing Program Final Rule: http://www.gpo.gov/fdsys/pkg/fr-2011-05-06/pdf/2011-10568.pdf. August 18, 2011, Federal Register Medicare Hospital Inpatient Prospective Payment System Final Rule: http://www.gpo.gov/fdsys/pkg/fr-2011-08-18/pdf/2011-19719.pdf. November 30, 2011, Federal Register Medicare Hospital Outpatient Prospective Payment System Final Rule: http://www.gpo.gov/fdsys/pkg/fr-2011-11-30/pdf/2011-28612.pdf. Additional information on the hospital VBP program can be found on the CMS Web site at https://www.cms.gov/hospital-value-based-purchasing/. 1 P a g e

QUALITY MEASURES SELECTED FOR THE HOSPITAL VBP PROGRAM Federal Register pages 26495-26511 (May 6, 2011 VBP final rule) Federal Register pages 74527-74531 (November 30, 2011 OPPS final rule) Background: The ACA requires the quality measures used for the VBP program be taken from the hospital IQR program. All quality measures must be reported on CMS Hospital Compare Web site for at least one year prior to the beginning of the measures VBP performance period. The use of readmissions measures in the VBP program is expressly prohibited. Federal FY2013 Program: The federal FY2013 VBP program will assess hospital quality performance using quality measures from two domains (categories of quality measures): Process of Care (12 measures in the areas of heart attack, heart failure, pneumonia, surgeries and health care-associated infections); and Patient Experience of Care (one measure consisting of eight Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey dimensions). Federal FY2014 Program: The federal FY2014 VBP program will assess hospital quality performance using quality measures from three domains: Process of Care (13 measures consisting of the 12 federal FY2013 program measures and one new measure); Patient Experience of Care (same HCAHPS measures as federal FY2013 program); and Patient Outcomes (three mortality measures). The following table shows the VBP measures by domain and program year. Measure ID AMI 7a Measure Process of Care Domain Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival FY2013 Program FY2014 Program AMI 8a Primary PCI Received Within 90 Minutes of Hospital Arrival HF 1 Discharge Instructions PN 3b Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital PN 6 Initial Antibiotic Selection for CAP in Immunocompetent Patient SCIP Inf 1 Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision SCIP Inf 2 Prophylactic Antibiotic Selection for Surgical Patients SCIP Inf 3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time 2 P a g e

SCIP Inf 4 SCIP Inf 9 SCIP Card 2 SCIP VTE 1 SCIP VTE 2 HCAHPS Dimension 3 P a g e Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2 Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery Patient Experience of Care Domain Communication with Nurses Communication with Doctors Responsiveness of Hospital Staff Pain Management Communication about Medicines Hospital Cleanliness & Quietness Discharge Information Overall Rating of Hospital Patient Outcomes Domain MORT 30 AMI Acute Myocardial Infarction (AMI) 30-Day Mortality Rate MORT 30 HF Heart Failure (HF) 30-Day Mortality Rate MORT 30 PN Pneumonia (PN) 30-Day Mortality Rate CMS does not utilize all eligible process measures collected under the hospital IQR program for the VBP program. CMS excludes from the VBP program measures that are identified by CMS as topped out and measures that are, or will be, retired from the hospital IQR program. CMS identifies topped out measures as process measures where hospital s performance scores in the 75th and 90th percentiles are statistically identical. As noted in the table above, for measurement under the VBP program, CMS has combined two HCAHPS dimensions (cleanliness of hospital environment and quietness of hospital environment) into one dimension. CMS has also excluded from measurement under the program the Recommend this Hospital dimension. It is anticipated that CMS will add additional measures to the VBP program for federal FY2015 and beyond, including a Medicare spending per beneficiary measure, Agency for Healthcare Research and Quality (AHRQ) outcomes measures, and hospital-acquired condition (HAC) measures that were adopted, but ultimately rejected for use under the federal FY2014 VBP program. BASELINE AND PERFORMANCE PERIODS USED TO ASSESS HOSPITAL PERFORMANCE UNDER THE HOSPITAL VBP PROGRAM Federal Register pages 26494-26495 (May 6, 2011 VBP final rule) Federal Register pages 74534-74535 (November 30, 2011 OPPS final rule)

Background: Under the program, VBP scores will be calculated for each hospital based on its performance on the selected quality measures during two specific time periods. These time periods are defined by CMS as a baseline period and a performance period. Data on the quality measures collected during the baseline period will serve as the basis for determining hospital quality improvement (see Scoring Methodology section below) and establishing the VBP national performance standards (see National Performance Standards section below). Data on the quality measures collected during the performance period will be used to determine hospital s achievement and improvement scores (see Scoring Methodology section below) by comparing hospital performance to the national performance standards derived from the baseline period data. Below are the adopted baseline and performance periods for the federal fiscal years 2013 and 2014 VBP programs by domain: Federal FY2013 Program: Process of Care and Patient Experience of Care Domains: o Baseline Period: July 1, 2009 through March 31, 2010 (nine-months) o Performance Period: July 1, 2011 through March 31, 2012 (nine-months) Federal FY2014 Program: Process of Care and Patient Experience of Care Domains: o Baseline Period: April 1, 2010 through December 31, 2010 (nine-months) o Performance Period: April 1, 2012 through December 31, 2012 (nine-months) Patient Outcomes Domain: o Baseline Period: July 1, 2009 through June 30, 2010 (12-months) o Performance Period: July 1, 2011 through June 30, 2012 (12-months) Time constraints for program implementation along with CMS time requirements for calculating and publishing VBP scores and incentive payment percentages require the agency to implement nine-month performance periods for the process of care and patient experience of care measures for the first two program years. The mirroring nine-month baseline periods attempt to avoid seasonality issues. CMS anticipates using at least 12-months as the baseline and performance periods in future years of the VBP program. NATIONAL PERFORMANCE STANDARDS FOR THE HOSPITAL VBP PROGRAM Federal Register pages 26511-26513 (May 6, 2011 VBP final rule) Federal Register pages 74535-74541 (November 30, 2011 OPPS final rule) Background: National data from the baseline period will be used to set the VBP national performance standards for each program measure. The national benchmarks represent high 4 P a g e

achievement quality standards and the national achievement thresholds and floors represent the minimum quality standards (national floors are taken into consideration for the HCAHPS measures only). Hospital performance scores on each individual quality measure will be compared to national performance standards to calculate VBP points for achievement, improvement, and consistency (HCAHPS measures only). These points will be used to calculate overall domain scores and ultimately a Total Performance Score (see Scoring Methodology section below). Federal Fiscal Years 2013 and 2014 Programs: The following describes the national performance standards for the VBP program: National Benchmarks: The benchmark for each program measure is set at the average performance score for the top 10 percent of all eligible hospitals during the baseline period. National Achievement Thresholds: The threshold for each program measure is set at the median performance score (50th percentile) for all eligible hospitals during the baseline period. National Floors: The floors for the HCAHPS measures is set at the lowest performance score (0th percentile) for all eligible hospitals during the baseline period. The national benchmarks, achievement thresholds, and floors (HCAHPS measures only) for each program measure, by domain, are shown in the table below. A semicolon separates the federal FY2013 and FY2014 standards. Measure ID AMI 7a Measure Process of Care Domain Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival National Threshold National Benchmark 0.6548; 0.8066 0.9191; 0.9630 AMI 8a Primary PCI Received Within 90 Minutes of Hospital Arrival 0.9186; 0.9344 1.0000; 1.0000 HF 1 Discharge Instructions 0.9077; 0.9266 1.0000; 1.0000 PN 3b Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital 0.9643; 0.9730 1.0000; 1.0000 PN 6 Initial Antibiotic Selection for CAP in Immunocompetent Patient 0.9277; 0.9446 0.9958; 1.0000 SCIP Inf 1 Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision 0.9735; 0.9807 0.9998; 1.0000 SCIP Inf 2 Prophylactic Antibiotic Selection for Surgical Patients 0.9766; 0.9813 1.0000; 1.0000 SCIP Inf 3 Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time 0.9507; 0.9663 0.9968; 0.9996 SCIP Inf 4 Cardiac Surgery Patients with Controlled 6AM Postoperative 0.9428; 0.9634 0.9963; 1.0000 SCIP Inf 9 Serum Glucose Postoperative Urinary Catheter Removal on Post Operative Day 1 or 2 0.9286 (2014 program only) 0.9989 (2014 program only) 5 P a g e

Measure ID SCIP Card 2 SCIP VTE 1 SCIP VTE 2 HCAHPS Dimension MORT 30 AMI MORT 30 HF MORT 30 PN Measure Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative Period Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery Patient Experience of Care Domain National Threshold National Benchmark 0.9399; 0.9565 1.0000; 1.0000 0.9500; 0.9462 1.0000; 1.0000 0.9307; 0.9492 0.9985; 0.9983 Floor Percent Percent Percent Communication with Nurses 38.98; 42.84 75.18; 75.79 84.70; 84.99 Communication with Doctors 51.51; 55.49 79.42; 79.57 88.95; 88.45 Responsiveness of Hospital Staff 30.25; 32.15 61.82; 62.21 77.69; 78.08 Pain Management 34.76; 40.79 68.75; 68.99 77.90; 77.92 Communication about Medicines 29.27; 36.01 59.28; 59.85 70.42; 71.54 Hospital Cleanliness & Quietness 36.88; 38.52 62.80; 63.54 77.64; 78.10 Discharge Information 50.47; 54.73 81.93; 82.72 89.09; 89.24 Overall Rating of Hospital 29.32; 30.91 66.02; 67.33 82.52; 82.55 Patient Outcomes Domain Acute Myocardial Infarction (AMI) 30-Day Mortality Rate (shown as survival rate) Heart Failure (HF) 30-Day Mortality Rate (shown as survival rate) Pneumonia (PN) 30-Day Mortality Rate (shown as survival rate) 2014 Program only 2014 Program only 0.8477 0.8673 0.8861 0.9042 0.8818 0.9021 SCORING METHODOLOGY FOR THE HOSPITAL VBP PROGRAM Federal Register pages 26513-26527 (May 6, 2011 VBP final rule) Background: While the ACA provides CMS with significant discretion in developing a scoring methodology under the VBP program, the law requires that hospital performance be evaluated for each measure based on both the achievement of high quality and improvement. The ACA requires that hospitals receive the higher of achievement or improvement points for each selected quality measure. Federal Fiscal Years 2013 and 2014 Programs: The following describes the scoring methodology for the VBP program. Hospitals must meet certain minimum case, measure, and survey requirements to participation in the VBP program (see Minimum Requirements and Exclusions under the Hospital VBP Program section below). Calculating VBP Achievement Points: Hospitals can earn up to 10 achievement points for each program measure for high quality care. Achievement points for a measure are earned when a hospital s performance period score is above the national threshold for 6 P a g e

that measure. Scores above the national benchmark are considered to be at the highest achievement level and earn the maximum (10) points. The closer a hospital s performance score is to the national benchmark, the higher the achievement points earned. Achievement points for each program measure will be calculated as follows: If a hospital s quality performance period score is: o At or above the national benchmark for the measure, the hospital receives the maximum of 10 achievement points; o Below the national threshold for the measure, the hospital receives zero achievement points; o Between the national benchmark and threshold for the measure, the hospital will receive between one and nine achievement points according to the following formula: [9 * ((hospital performance period score national threshold) / (national benchmark national threshold))] + 0.50 Calculating VBP Improvement Points: Hospitals can earn up to nine improvement points for each program measure for improvement in care quality. Improvement points for each measure will be earned when a hospital s performance score improves from the baseline period to the performance period. The more a hospital s performance score improves, the more improvement points are earned. Improvement points for each process measure will be calculated as follows: If a hospital s quality performance period score is: o At or below its baseline period score for the measure, the hospital will receive zero improvement points; o Above its baseline period score for the measure, the hospital will receive between zero and nine improvement points according to the following formula: [10 * ((hospital performance period score hospital baseline period score) / (national benchmark hospital baseline period score))] 0.50 Calculating VBP Consistency Points (Patient Satisfaction Domain Only): In addition to achievement and improvement points, hospitals can earn up to 20 consistency points under the patient experience of care domain. CMS believes that use of consistency points 7 P a g e

recognizes consistent achievement across the HCAHPS measures used for the VBP program. CMS will determine consistency points based on a hospital s lowest HCAHPS performance period measure score compared to the national threshold for that measure. If a hospital s lowest performance year score is: o At or above the national threshold for that measure, the hospital will receive the maximum of 20 consistency points. o At or below the zero percentile or floor (i.e. the lowest score in the nation) for that measure, the hospital will receive zero consistency points; o Between the achievement threshold and floor, the hospital will receive between one and 19 consistency points according to the following formula: (20 * consistency points multiplier) 0.5 where the consistency points multiplier is calculated as: ((hospital s lowest performance period score national floor) / (national threshold for that measure national floor)) In other words, if all of a hospital s HCAHPS scores are above the achievement threshold (i.e. national median value), the hospital will receive all 20 consistency points. If even one of the hospital s HCAHPS scores is the lowest in the nation, the hospital will not receive any consistency points. All other hospitals will receive between one and 19 consistency points based on how low their lowest HCAHPS score is. For the purposes of calculating achievement and improvement points under the VBP program, hospital mortality rates for the mortality measures under the patient outcomes domain are converted to survival rates. The following is an example of the achievement and improvement points calculation for all VBP program measures using the process measure PN-6: National Data needed to calculate VBP achievement and improvement points: Baseline Period Quality Data National Benchmark (FY2013 program) Average performance score for the top 10 percent of all hospitals for the measure National Threshold (FY2013 program) Median performance score (50th percentile) for all hospitals for the measure Percent 99.58 92.77 not used for improvement points calculation 8 P a g e

Hospital-Specific Data needed to calculate VBP achievement and improvement points: Baseline Period Quality Data Performance Period Quality Data Example Baseline Period Score Hospital performance on measure Example Performance Period Score Hospital performance on measure Percent 93 not used for achievement points calculation 96 Hospital-Specific achievement and improvement points calculation: VBP Achievement Points Earned for Measure: [9 * ((Hospital performance period score national threshold) / (national benchmark national threshold))] + 0.50 VBP Improvement Points Earned for Measure: [10 * ((Hospital performance period score hospital baseline period score)/(national benchmark hospital baseline period score))] 0.50 Final VBP Points Earned for Measure Higher of achievement or improvement points earned 5 points 4 points 5 points The following is an example of the consistency points calculation for the HCAHPS measures under the patient experience of care domain using the Communication about Medicines measure: Example Hospital s Lowest Performance Period HCAHPS Measure Score Hospital performance on Communication about Medicines measure its lowest HCAHPS score during the performance period National Floor (FY2013 program) Lowest performance score for all hospitals for the measure identified with the hospital s lowest HCAHPS measure score National Threshold (FY2013 program) Median performance score (50th percentile) for all hospitals for the measure identified with the hospital s lowest HCAHPS measure score Consistency VBP Points Earned for the Patient Experience of Care Domain Consistency Points = (20 * lowest consistency points multiplier) 0.50 where the consistency points multiplier = ((hospital s lowest HCAHPS performance period score national floor for that measure)/(national threshold for that measure national floor for that measure)) Percent 56 29.27 59.28 17 points 9 P a g e

CALCULATING OVERALL DOMAIN SCORES, DOMAIN WEIGHTING, AND CALCULATING A TPS UNDER THE HOSPITAL VBP PROGRAM Federal Register pages 26513-26527 (May 6, 2011 VBP final rule) Federal Register pages 74543-74544 (November 30, 2011 OPPS final rule) Background: For each hospital, once the final VBP points are calculated for each individual measure, overall domain scores are calculated for each of the program s domains (process of care and patient experience of care in federal FY2013; process of care, patient experience of care, and patient outcomes in federal FY2014). The overall domain scores are then combined to calculate a TPS for each hospital. The TPS will serve as the basis for determining a hospital s VBP payments or gain/loss under the program. CMS is required by the ACA to assign weights to each domain when calculating the TPS. Federal Fiscal Years 2013 and 2014 Programs: The following describes how overall domain scores will be calculated and how domains will be weighted, and, therefore, how a hospital s TPS will be calculated under the VBP program. Calculating Overall Domain Scores (all domains): For each domain, the overall domain score will be the sum of the final points earned for the domain divided by the maximum possible points for all useable measures in the domain. Domain Weighting and Calculating a TPS: The following describes the weights that will be applied to each domain to calculate the TPS by program year: FY2013 Program (percent): o Process of Care: 70 o Patient Experience of Care: 30 FY2014 Program (percent): o Process of Care: 45 o Patient Experience of Care: 30 o Patient Outcomes: 25 The following example steps through the calculation of a TPS. The example assumes an overall domain score of 50 percent for the process of care domain, 10 percent for the patient experience of care domain, and 60 percent for the patient outcomes domain and assumes hospital performance remained the same for both program years for the process and patient experience of care measures. Example FY2013 TPS Calculation (percent): o FY2013 weighted Process of Care Domain score: 50 * 70 = 35 o FY2013 weighted Patient Experience of Care Domain score: 10 * 30 = 3 Final TPS: 35 + 3 = 38 Example FY2014 TPS Calculation (percent): o FY2014 weighted Process of Care Domain score: 50 * 45 = 22.5 o FY2014 weighted Patient Experience of Care Domain score: 10 * 30 = 3 10 P a g e

o FY2014 weighted Patient Outcomes Domain score: 60 * 25 = 15 Final TPS: 22.5 + 3 + 15 = 40.5 VBP PAYMENT ADJUSTMENTS UNDER THE HOSPITAL VBP PROGRAM Federal Register pages 26531-26534 (May 6, 2011 VBP final rule) Background: The VBP program is designed to provide Medicare incentive payments to hospitals that meet or exceed quality performance standards, as mandated by the ACA and established by CMS. The ACA defines the VBP incentive payment amount for each hospital discharge as the product of the base operating diagnosis-related group (DRG) payment amount per discharge and the VBP incentive payment percentage. The ACA mandates that VBP incentive payments be funded by reductions in Medicare IPPS payments to all hospitals participating in the program. For federal FY2013, the VBP payment incentive pool will be funded by reducing Medicare IPPS payments by 1.0 percent. The law requires that the incentive pool contribution increase by 0.25 percent each year until it reaches 2.0 percent for federal FY2017 and thereafter. The reductions to fund the incentive pool are to be applied to the base Medicare inpatient operating DRG payment amount, excluding payment adjustments for disproportionate share hospitals (DSH), indirect medical education (IME), outliers, and low-volume hospitals. Also, as required by the ACA, Sole Community Hospitals (SCHs) and Medicare Dependent Hospitals (MDHs) will contribute to the VBP payment incentive pool based upon the federal rate calculation, regardless of whether or not they are paid at the federal rate. By law, the VBP program must be budget-neutral, meaning that total VBP incentive payments for a program year must be equal to the total amount of Medicare payment reductions for all hospitals for that program year. Federal Fiscal Years 2013 and 2014 Programs: CMS will use a linear exchange function to translate a hospital s TPS into VBP payment incentive percentages. This payment percentage will determine each hospital s total VBP incentive payment and, therefore, how Medicare inpatient payments will be redistributed under the program. The linear exchange function is the formula for a line that starts at a zero percent VBP incentive payment percentage for hospitals with an overall VBP score of zero and ends at x% for hospitals with a VBP score of 100. The x% is the slope of the line and will be determined based on the national distribution of VBP scores, such that the sum of all VBP payment incentives made under the program will be equal to the amount of dollars contributed to the payment pool. CMS will calculate and make VBP incentive payments to providers based on the Medicare provider number used for cost reporting purposes the CMS certification number (CCN) of the main provider (also referred to as OSCAR number). 11 P a g e

MINIMUM REQUIREMENTS AND ECLUSIONS UNDER THE HOSPITAL VBP PROGRAM Federal Register pages 26502-26511 (May 6, 2011 VBP final rule) Federal Register pages 74532-74534 (November 30, 2011 OPPS final rule) Background: The ACA mandates that the hospital VBP program apply to all subsection (d) inpatient hospitals i.e., all hospitals paid under the IPPS. This mandate excludes from the VBP program CAHs, psychiatric, rehabilitation, long term care, children s, and cancer hospitals, as well as hospitals in Puerto Rico. Maryland hospitals are exempt from the VBP program as long as the state continues to submit a report annually to CMS describing how a state-based program accomplishes similar quality and cost savings goals as the hospital VBP program. The ACA also mandates other minimum requirements and exclusions from the VBP program. These include: Hospitals subject to the 2.0 percent market basket penalty under the hospital IQR program during a VBP program year; Hospitals cited by CMS through the Medicare State Survey and Certification process for deficiencies during the performance period that pose immediate jeopardy to the health or safety of patients; Hospitals that do not report sufficient data for a minimum number of measures during the performance period; and Hospitals that do not report a minimum number of cases for the measures during the performance period. Federal Fiscal Years 2013 and 2014 Programs: The following describes the minimum number of cases, measures, and surveys needed for participation in the VBP program: Process of Care Domain: o The minimum number of cases required for each process of care measure is 10 cases. Measures with fewer than 10 cases in the performance period will not be scored. o The minimum number of useable process measures is four out of the 12 measures in the domain for the federal FY2013 program and four of 13 for the federal FY2014 program. Hospitals with fewer than four useable measures for the performance period will be excluded from the VBP program for that year. Patient Experience of Care Domain: o A patient experience domain score will not be calculated if a hospital does not report a minimum of 100 HCAHPS surveys during the performance period. 12 P a g e

Patient Outcomes Domain: o The minimum number of cases required for each outcomes measure is 10 cases. Measures with fewer than 10 cases in the performance period will not be scored. o The minimum number of useable process measures is two out of the three measures in the domain. Hospitals with fewer than two useable measures for the performance period will be excluded from the VBP program for that year. o If a hospital has insufficient data in the baseline period, but useable data for the performance period, only achievement points (no improvement points) will be calculated for the measure. Hospitals that do not meet the minimum measure/case/survey counts for any of the adopted domains (process, patient experience of care, or patient outcomes) will be excluded from the VBP program. Excluded hospitals will not be subject to the VBP pool contribution reductions and will not be eligible for VBP payment incentives. NOTIFICATION OF VBP PAYMENT ADJUSTMENTS UNDER THE HOSPITAL VBP PROGRAM Federal Register pages 26534 26536 (May 6, 2011 VBP final rule) Background: The ACA requires CMS to notify each participating hospital of its Medicare VBP payment adjustments at least 60 days prior to the start of the applicable federal fiscal year. Federal Fiscal Years 2013 and 2014 Programs: CMS has adopted the following timeline for notifying hospitals of their VBP payment incentive amounts for the federal FY2013 program. CMS has not yet adopted a comparable timeline for the federal FY2014 program, but it is likely to be similar to the timeline described below: 60-days prior to the beginning of federal FY2013 (August 2012): CMS will inform each hospital of the estimated amount of its VBP incentive payment for federal FY2013 discharges through its QualityNet account. November 1, 2012: CMS will inform each hospital of the actual amount of its VBP incentive payment adjustment for federal FY2013 discharges through its QualityNet account. January 2013: CMS will incorporate the VBP incentive payment adjustments into the claims processing system, allowing the adjustment to be applied to all federal FY2013 discharges, including those that have occurred beginning on October 1, 2012. To ensure this notification procedure works, CMS is requiring that each participating hospital establish a QualityNet account, if it has not already done so for the hospital IQR program. 13 P a g e

CMS will notify hospitals of the 1.0 percent reduction to their base operating DRG payments in the federal FY2013 IPPS final rule. This rule must be published 60-days prior to the beginning of federal FY2013 (August 2012). CMS will address the operational aspects of the reduction as part of that rulemaking process. PUBLIC REPORTING OF VBP SCORES AND INCENTIVE PAYMENTS UNDER THE HOSPITAL VBP PROGRAM Federal Register page 26534-26536 (May 6, 2011 VBP final rule) Background: The ACA requires CMS to make information available to the public regarding the performance of individual hospitals under the VBP program. CMS must allow hospitals an opportunity to review their VBP scoring information and submit corrections prior to the data being made public. Federal Fiscal Years 2013 and 2014 Programs: CMS will make public the following information from the VBP program on the Hospital Compare Web site: Hospital s performance scores on each program measure; Hospital s condition scores (the aggregated performance score for each condition area i.e., AMI, HF, PN, SCIP, HAI). CMS would use this score for public reporting purposes only, not for calculating overall VBP scores); Hospital s domain scores; and Hospital s overall VBP scores. CMS will not display information on hospital payment amounts or percentages on the Hospital Compare site. For the federal FY2013 program, CMS will make this information available to hospitals for review on November 1, 2012 via each hospital s QualityNet account. Hospitals would have 30 calendar days to review and submit corrections to this information. CMS has not announced a review date for the federal FY2014 program, but it will likely be November of 2013. REVIEW AND CORRECTION PROCESS Federal Register pages 74544-74547 (November 30, 2011 OPPS final rule) Background: The ACA requires the Secretary to ensure that hospitals have the opportunity to review and submit corrections to information that will be made available to the public related to the VBP program. Federal Fiscal Years 2013 and 2014 Programs: For the process measures, CMS will use the existing hospital IQR program s data submission, review, and correction processes under the VBP program. As such, hospitals will have no further opportunity to review or correct data other than the opportunity provided under the IQR program s policies. For the HCAHPS measures, CMS is implementing a new two-phase process for review and correction. In the first phase, hospitals will have the opportunity to review and correct data 14 P a g e

submitted on all HCAHPS items used under the IQR program, regardless of whether these items are part of the VBP program. In the second phase, hospitals will have the opportunity to review the patient-mix and mode-adjusted HCAHPS scores on the HCAHPS dimensions specifically used under the VBP program. Under this process, hospitals will be provided with two, one-week periods to review and make any corrections to their HCAHPS data one week for phase one and one week for phase two. CMS has not yet established review and correction processes for the VBP outcomes measures and total performance scores. CMS is expected to propose these processes in future rulemaking. RECONSIDERATION AND APPEALS PROCEDURES Federal Register page 26536-26537 (May 6, 2011 VBP final rule) Background: The ACA requires CMS to establish a process for hospitals to appeal the calculation of their VBP performance scores and incentives. The ACA prohibits any administrative or judicial review process for the methodologies used to calculate VBP performance scores and payment adjustments, the VBP performance standards and performance period, the measures used under the program, and the validation methodology. Federal Fiscal Years 2013 and 2014 Programs: CMS has not yet established an appeals process and is expected to propose a process in future rulemaking. 15 P a g e