On April 28, the bipartisan leaders of the Senate Finance Committee—Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA)—began the Congressional process to enact health reform legislation by releasing a set of policy options for the Committee’s consideration that would significantly reform the way health care is delivered in the United States. The options were considered by the Committee on April 29 in a closed-door “walk-through” of the Baucus-Grassley options paper, entitled Transforming the Health Care Delivery System: Proposals to Improve Patient Care and Reduce Health Care Costs. “Everyone agrees that America’s health care system is broken,” said Baucus. “Over the past year, I’ve been talking to members of the health care community and listening to innovative ideas about how to improve quality in the way health care is delivered to patients. The policy options Senator Grassley and I are releasing today put some meat on the bones of those ideas to strengthen our discussion moving forward. But nothing is set in stone. I look forward to a robust dialogue with my colleagues on these ideas in the coming months, as we work together to build the comprehensive health reform this country needs.”  Public comments are due to the Finance Committee by May 15, 2009. GNYHA will be submitting detailed comments on behalf of its members. Additional papers are expected in advance of two more “walk-throughs,” one on coverage issues and one on health care financing for the uninsured. The Committee is expected to begin voting on health reform in early June.

Hospital Provisions: There are several major provisions affecting hospitals among the Baucus-Grassley options. Among them are:

• Value-based purchasing (VBP): Under the proposal, a VBP program would be put into place for hospitals beginning in Federal fiscal year (FY) 2012. FY 2012 would be a data collection year, with actual value-based payments beginning in FY 2013. Under the program, 2% of Medicare inpatient prospective payment system (IPPS) payments (excluding certain add-ons such as disproportionate share hospital and indirect medical education) would be withheld from hospitals to finance VBP payments for eligible hospitals. This withheld amount would increase annually to reach 5% of IPPS payments by FY 2016. Hospitals would receive payments if they reached certain levels of performance or performance improvement relative to other hospitals. Specifically, hospitals in the lowest quartile of performance would receive no VBP payments, effectively suffering the full percentage cut made to finance the payments. Hospitals between the 25th and 75th percentiles would receive payments on a sliding scale. Hospitals above the 75th percentile would receive full payments. The measures used are intended to be similar to those used currently under the pay-for-reporting program known as “RHQDAPU,” although the HHS Secretary (see story, page 1) would have the authority to add and delete, as she currently does under RHQDAPU.

• Readmissions and Bundling: Starting in FY 2013, hospitals with readmissions above the 75th percentile for selected conditions would be subject to a payment withhold on an MS-DRG-by-MS-DRG basis. The amount withheld would be based on the prior year’s performance and would be equal to 20 percent of the MS-DRG payment amount. Hospitals subject to a payment withhold could be reimbursed for these funds, not to exceed the withhold amounts in a single year, if the patients involved do not have preventable readmissions within 30 days of discharge. Withheld funds that are not repaid to hospitals would be returned to the Medicare Trust Funds. This policy would then be phased-out as bundled Medicare payments for acute and post-acute care services would be phased-in. Beginning in FY 2015, IPPS hospital services and post-acute care services occurring or initiated within 30 days of discharge from a hospital would be paid through a bundled payment. Post-acute payments would include home health, skilled nursing facility, rehabilitation hospitals, and long-term care hospital services—but would not include physician services, either in the hospital or post discharge. Bundled payments would be implemented in three phases, starting in October 2014 with conditions that account for the top 20 percent of post-acute spending. In FY 2017, phase two of the bundling policy would be implemented and apply to admissions for conditions that would account for the next 30 percent of post-acute care spending. Implementation of the final phase of bundling would begin in October 2018 (FY 2019) and would include all other conditions that account for the remaining 50 percent of post-acute care spending. The bundled payments would be calculated as the inpatient MS-DRG amount plus post-acute care costs of treating patients in that MS-DRG. This bundled payment amount would be adjusted to capture savings from the expected efficiencies gained from improving patient care and provider coordination within the bundled payment system. Also included in the bundled payment would be expected or planned readmissions within the 30-day post-acute timeframes.