Affordable Care Act

In addition to expanding coverage via the Medicaid expansion and Insurance Exchanges, the Affordable Care Act (ACA) creates a range of new reimbursement programs to encourage healthcare providers to collaborate to improve quality and lower costs. HIDA Government Affairs provides regular analysis on both the political initiatives to repeal and replace the ACA as well as the Medicare policies it created including, Accountable Care Organizations (ACOs), Hospital Value Based Purchasing program (HVBP), Hospital Readmission Reduction Policy and Hospital Acquired Condition policy (infection prevention). These payment initiatives provide opportunities for the supply chain to partner with their customers and navigate complicated federal reimbursement quality and outcome requirements.

Accountable Care Organizations:

ACOs are groups of providers such as hospitals, physicians, and post-acute facilities that agree to work together to coordinate Medicare patient care and reduce costs. The goal of an ACO is to deliver seamless, high-quality care, instead of the fragmented care that often results from a fee-for-service payment system in which different providers receive different, disconnected payments. To date, Medicare ACOs serve 9.7 million beneficiaries across 50 states plus Washington, D.C., and Puerto Rico.

Currently, Medicare has three ACO models with escalating opportunities for financial risk and reward. ACOs new to the program can choose a model that involves fewer financial penalties, and as the organization gains experience, it can apply to be part of the more advanced programs which offer opportunities for greater rewards while also risking penalties if target savings are not achieved. In 2015 CMS added a new Track 3 option for Medicare Shared Savings Plan (MSSP) ACOs based on successful features of the former Pioneer ACO Model, such as higher rates of shared savings, the prospective assignment of beneficiaries, and the opportunity to use new care coordination tools. At the end of 2016, CMS implemented a new program called MSSP Track 1+ in order to encourage more practices, specifically smaller and more rural practices, to advance to a performance-based risk track.

Hospital Value Based Purchasing:

The HVBP program is aimed at rewarding providers for quality care. The program provides an opportunity for hospitals to earn an incentive payment if these efficiency and quality benchmarks are exceeded. Conversely, lower performing hospitals could experience decreasing payments. The hospital performance scores are based on four weighted domains: clinical care (25%), patient and caregiver centered experience (25%), safety (25%), and efficiency and cost reduction (25%).[1] In FY 2017, approximately 3,000 hospitals participating in the program, of which more than 1,600 (55%) hospitals received bonuses from Medicare under the program, which was 200 less than the previous year (59%).

Hospital Readmission Reduction Program:

The HRRP requires Medicare to reduce payments to hospitals with relatively high readmission rates and applies to most acute care hospitals, but exempts psychiatric, rehabilitation, long term care, children’s, cancer and critical access hospitals, as well as hospitals in Maryland (because they are not paid under the IPPS). Under the HRRP, hospitals with 30 day readmission rates that exceed their hospital specific expected readmission rate are penalized by a reduction in payments across all Medicare admissions. If a hospital is above its expected readmission rate for one of the conditions (heart attack, heart failure, pneumonia, COPD, CABG, or hip/knee replacement), up to a 3% across-the-board cut is triggered.

Medicare uses an “all-cause” definition of readmission, meaning that hospital readmission within 30 days of a discharge from the initial hospitalization are considered readmissions, regardless of the reason for readmission. However, as of 2014, CMS made an exception for planned hospitalizations within the 30-day window.

Hospital Acquired Condition Reduction Program:

The ACA created a broad healthcare acquired condition (HAC) policy that sets national infection rates and penalizes hospitals that fall into the top quartile. The penalty is a 1 percent cut of all its Medicare payments across the board. No matter how successful hospitals are in lowering infection rates, there will also be a top quartile that triggers a 1 percent cut to a quarter of the nation’s hospitals unless Congress changes the program.


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Government Affairs Contact

Josh Babb »
Director, Government Affairs
703-838-6113