2454 Federal Register / Vol. 76, No. 9 / Thursday, January 13, 2011 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 422 and 480 

[CMS–3239–P] 

RIN 0938–AQ55 

Medicare Program; Hospital Inpatient 

Value-Based Purchasing Program 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: In this proposed rule, we are 

proposing to implement a Hospital 

Value-Based Purchasing program 

(‘‘Hospital VBP program’’ or ‘‘the 

program’’) under section 1886(o) of the 

Social Security Act (‘‘Act’’), under which 

value-based incentive payments will be 

made in a fiscal year to hospitals that 

meet performance standards with 

respect to a performance period for the 

fiscal year involved. The program will 

apply to payments for discharges 

occurring on or after October 1, 2012, in 

accordance with section 1886(o) of the 

Social Security Act (as added by section 

3001(a) of the Patient Protection and 

Affordable Care Act (Pub. L. 111–148), 

enacted on March 23, 2010, as amended 

by the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152), enacted on March 30, 2010 

(collectively known as the Affordable 

Care Act)). The measures we are 

proposing to initially adopt for the 

program are a subset of the measures 

that we have already adopted for the 

existing Medicare Hospital Inpatient 

Quality Reporting Program (Hospital 

IQR program), formerly known as the 

Reporting Hospital Quality Data for the 

Annual Payment Update Program 

(RHQDAPU), and we are proposing, 

based on whether a hospital meets or 

exceeds the performance standards that 

we are proposing to establish with 

respect to the measures, to reward the 

hospital based on its actual 

performance, rather than simply its 

reporting of data for those measures. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on March 8, 2011. 

ADDRESSES: In commenting, please refer 

to file code CMS–3239–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address only: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–3239– 

P, P.O. Box 8010, Baltimore, MD 21244– 

8010. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–3239–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

8691 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Allison Lee, (410) 786–8691. 

SUPPLEMENTARY INFORMATION: Inspection 

of Public Comments: All comments 

received before the close of the 

comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

I. Background 

A. Overview 

B. Hospital Inpatient Quality Data 

Reporting Under Section 501(b) of Public 

Law 108–173 

C. Hospital Inpatient Quality Reporting 

Under Section 5001(a) of Public Law 

109–171 

D. 2007 Report to Congress: Plan To 

Implement a Medicare Hospital ValueBased Purchasing Program 

E. Provisions of the Affordable Care Act 

II. Provisions of the Proposed Regulations 

A. Overview of the Proposed Hospital 

Value-Based Purchasing Program 

B. Proposed Performance Period 

C. Proposed Measures 

D. Proposed Performance Standards 

E. Proposed Methodology for Calculating 

the Total Performance Score 

F. Applicability of the Value-Based 

Purchasing Program to Hospitals 

G. The Exchange Function 

H. Proposed Hospital Notification and 

Review Procedures 

I. Proposed Reconsideration and Appeal 

Procedures 

J. Proposed FY 2013 Validation 

Requirements for Hospital Value-Based 

Purchasing 

K. Additional Information 

L. QIO Quality Data Access 

III. Collection of Information Requirements 

IV. Response to Comments 

V. Regulatory Impact Statement 

A. Overall Impact 

B. Anticipated Effects 

C. Alternatives Considered 

D. Accounting Statement 

Acronyms 

Because of the many terms to which we 

refer by acronym in this proposed rule, we 

are listing the acronyms used and their 

corresponding meanings in alphabetical 

order below: 

AHRQ Agency for Healthcare Research and 

Quality 


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AMI Acute Myocardial Infarction 

CCN CMS Certification number 

CMS Centers for Medicare & Medicaid 

Services 

DRG Diagnosis-Related Group 

FISMA Federal Information Security and 

Management Act 

HCAHPS Hospital Consumer Assessment of 

Healthcare Providers and Systems 

HF Heart Failure 

HIPAA Health Insurance Portability and 

Accountability Act 

HOP QDRP Hospital Outpatient Quality 

Data Reporting Program 

IPPS Inpatient prospective payment 

systems 

IQR Inpatient Quality Reporting 

NQF National Quality Forum 

PN Pneumonia 

PQRI Physician Quality Reporting Initiative 

PRRB Provider Reimbursement Review 

Board 

PSI Patient Safety Indicator 

QIO Quality Improvement Organization 

QRS Quality Review Study 

RFA Regulatory Flexibility Act 

RHQDAPU Reporting Hospital Quality Data 

for the Annual Payment Update Program 

RIA Regulatory Impact Analysis 

SCIP Surgical Care Improvement 

VBP Value-Based Purchasing 

I. Background 

A. Overview 

The Centers for Medicare & Medicaid 

Services (CMS) promotes higher quality 

and more efficient health care for 

Medicare beneficiaries. In recent years, 

we have undertaken a number of 

initiatives to lay the foundation for 

rewarding health care providers and 

suppliers for the quality of care they 

provide by tying a portion of their 

Medicare payments to their performance 

on quality measures. These initiatives, 

which include demonstration projects 

and quality reporting programs, have 

been applied to various health care 

settings, including physicians’ offices, 

ambulatory care facilities, hospitals, 

nursing homes, home health agencies, 

and dialysis facilities. The overarching 

goal of these initiatives is to transform 

Medicare from a passive payer of claims 

to an active purchaser of quality health 

care for its beneficiaries. 

This effort is supported by our 

adoption of an increasing number of 

widely-agreed upon quality measures 

for purposes of our existing quality 

reporting programs. We have worked 

with stakeholders to define measures of 

quality in almost every setting. These 

measures assess structural aspects of 

care, clinical processes, patient 

experiences with care, and, 

increasingly, outcomes. 

We have implemented quality 

measure reporting programs that apply 

to various settings of care. With regard 

to hospital inpatient services, we 

implemented the Hospital IQR program. 

In addition, we have implemented 

quality reporting programs for hospital 

outpatient services through the Hospital 

Outpatient Quality Data Reporting 

Program (HOP QDRP), and for 

physicians and other eligible 

professionals through the Physician 

Quality Reporting Initiative (PQRI). We 

have also implemented quality reporting 

programs for home health agencies and 

skilled nursing facilities based on 

conditions of participation, and an endstage renal disease quality reporting 

program based on conditions for 

coverage. 

This new program will necessarily be 

a fluid model, subject to change as 

knowledge, measures and tools evolve. 

We view the Hospital VBP program 

under section 1886(o) of the Social 

Security Act (the Act) as the next step 

in promoting higher quality care for 

Medicare beneficiaries and transforming 

Medicare into an active purchaser of 

quality health care for its beneficiaries. 

In developing this rule as well as 

other value-based payment initiatives, 

CMS applied the following principles 

for the development and use of 

measures and scoring methodologies. 

Purpose: 

CMS views value-based purchasing as 

an important step to revamping how 

care and services are paid for, moving 

increasingly toward rewarding better 

value, outcomes, and innovations 

instead of merely volume. 

Use of Measures: 

• Public reporting and value-based 

payment systems should rely on a mix 

of standards, process, outcomes, and 

patient experience measures, including 

measures of care transitions and 

changes in patient functional status. 

Across all programs, CMS seeks to move 

as quickly as possible to the use of 

primarily outcome and patient 

experience measures. To the extent 

practicable and appropriate, outcomes 

and patient experience measures should 

be adjusted for risk or other appropriate 

patient population or provider 

characteristics. 

• To the extent possible and 

recognizing differences in payment 

system maturity and statutory 

authorities, measures should be aligned 

across Medicare’s and Medicaid’s public 

reporting and payment systems. CMS 

seeks to evolve to a focused core-set of 

measures appropriate to the specific 

provider category that reflects the level 

of care and the most important areas of 

service and measures for that provider. 

• The collection of information 

should minimize the burden on 

providers to the extent possible. As part 

of that effort, CMS will continuously 

seek to align its measures with the 

adoption of meaningful use standards 

for health information technology (HIT), 

so the collection of performance 

information is part of care delivery. 

• To the extent practicable, measures 

used by CMS should be nationally 

endorsed by a multi-stakeholder 

organization. Measures should be 

aligned with best practices among other 

payers and the needs of the end users 

of the measures. 

Scoring Methodology: 

• Providers should be scored on their 

overall achievement relative to national 

or other appropriate benchmarks. In 

addition, scoring methodologies should 

consider improvement as an 

independent goal. 

• Measures or measurement domains 

need not be given equal weight, but over 

time, scoring methodologies should be 

more weighted towards outcome, 

patient experience and functional status 

measures. 

• Scoring methodologies should be 

reliable, as straightforward as possible, 

and stable over time and enable 

consumers, providers, and payers to 

make meaningful distinctions among 

providers’ performance. 

CMS welcomes comments on these 

principles. 

B. Hospital Inpatient Quality Data 

Reporting Under Section 501(b) of 

Public Law 108–173 

Section 501(b) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA), 

Public Law 108–173, added section 

1886(b)(3)(B)(vii) to the Act. This 

section established the original 

authority for the Hospital IQR program 

and revised the mechanism used to 

update the standardized payment 

amount for inpatient hospital operating 

costs. Specifically, section 

1886(b)(3)(B)(vii)(I) of the Act provided 

for a reduction of 0.4 percentage points 

to the annual percentage increase 

(sometimes referred to at that time as 

the market basket update) for FY 2005 

through FY 2007 for a subsection (d) 

hospital if the hospital did not submit 

data on a set of 10 quality indicators 

established by the Secretary as of 

November 1, 2003. It also provided that 

any reduction applied only to the fiscal 

year involved, and would not be taken 

into account in computing the 

applicable percentage increase for a 

subsequent fiscal year. The statute 

thereby established an incentive for 

many subsection (d) hospitals to submit 

data on the quality measures established 

by the Secretary. 

We implemented section 

1886(b)(3)(B)(vii) of the Act in the FY 


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2005 IPPS final rule (69 FR 49078) and 

codified the applicable percentage 

change in § 412.64(d) of our regulations. 

We adopted additional requirements 

under the Hospital IQR program in the 

FY 2006 IPPS final rule (70 FR 47420). 

C. Hospital Inpatient Quality Reporting 

Under Section 5001(a) of Public Law 

109–171 

1. Change in the Reduction to the 

Annual Percentage Increase 

Section 5001(a) of the Deficit 

Reduction Act of 2005 (DRA), Public 

Law 109–171, further amended section 

1886(b)(3)(B) of the Act to, among other 

things, revise the mechanism used to 

update the standardized payment 

amount for hospital inpatient operating 

costs by adding new section 

1886(b)(3)(B)(viii) to the Act. 

Specifically, sections 

1886(b)(3)(B)(viii)(I) and (II) of the Act 

as added by the DRA originally 

provided that the annual percentage 

increase for FY 2007 and each 

subsequent fiscal year shall be reduced 

by 2.0 percentage points for a subsection 

(d) hospital that does not submit quality 

data in a form and manner, and at a 

time, specified by the Secretary. Section 

1886(b)(3)(B)(viii)(I) of the Act also 

provided that any reduction in a 

hospital’s annual percentage increase 

will apply only with respect to the fiscal 

year involved, and will not be taken into 

account for computing the applicable 

percentage increase for a subsequent 

fiscal year. 

In the FY 2007 IPPS final rule (71 FR 

48045), we amended our regulations at 

§ 412.64(d)(2) to reflect the 2.0 

percentage point reduction required 

under the DRA. 

2. Selection of Quality Measures 

Section 1886(b)(3)(B)(viii)(V) of the 

Act, before it was amended by section 

3001(a)(2)(B) of the Affordable Care Act, 

required that, effective for payments 

beginning with FY 2008, the Secretary 

add other measures that reflect 

consensus among affected parties, and 

to the extent feasible and practicable, 

have been set forth by one or more 

national consensus building entities. 

The National Quality Forum (NQF) is a 

voluntary consensus standard-setting 

organization with a diverse 

representation of consumer, purchaser, 

provider, academic, clinical, and other 

health care stakeholder organizations. 

The NQF was established to standardize 

health care quality measurement and 

reporting through its consensus 

development process. We have 

generally adopted NQF-endorsed 

measures for purposes of the Hospital 

IQR program. However, we believe that 

consensus among affected parties also 

can be reflected by other means, 

including consensus achieved during 

the measure development process, 

consensus shown through broad 

acceptance and use of measures, and 

consensus achieved through public 

comment. 

Section 1886(b)(3)(B)(viii)(VI) of the 

Act authorizes the Secretary to replace 

any quality measures or indicators in 

appropriate cases, such as when all 

hospitals are effectively in compliance 

with a measure, or the measures or 

indicators have been subsequently 

shown to not represent the best clinical 

practice. We interpreted this provision 

to give us broad discretion to replace 

measures that are no longer appropriate 

for the Hospital IQR program. 

We have adopted 45 measures under 

the Hospital IQR program for the FY 

2011 payment determination. Of these 

measures, 27 are chart-abstracted 

process of care measures, which assess 

the quality of care furnished by 

hospitals in connection with four topics: 

Acute Myocardial Infarction (AMI); 

Heart Failure (HF); Pneumonia (PN); 

and Surgical Care Improvement (SCIP) 

(75 FR 50182). Fifteen of the measures 

are claims-based measures, which assess 

the quality of care furnished by 

hospitals on the following topics: 30- 

day mortality and 30-day readmission 

rates for Medicare patients diagnosed 

with either AMI, HF, or PN; Patient 

Safety Indicators/Inpatient Quality 

Indicators/Composite Measures; and 

Patient Safety Indicators/Nursing 

Sensitive Care. Three of the measures 

are structural measures that assess 

hospital participation in cardiac 

surgery, stroke care, and nursing 

sensitive care systemic databases. 

Finally, the Hospital Consumer 

Assessment of Healthcare Providers and 

Systems (HCAHPS) patient experience 

of care survey is included as a measure 

for the FY 2011 payment determination. 

The technical specifications for the 

Hospital IQR program measures, or links 

to Web sites hosting technical 

specifications, are contained in the 

CMS/The Joint Commission 

Specifications Manual for National 

Hospital Inpatient Quality Measures 

(Specifications Manual). This 

Specifications Manual is posted on the 

CMS QualityNet Web site at https:// 

www.QualityNet.org/. We maintain the 

technical specifications by updating this 

Specifications Manual semiannually, or 

more frequently in unusual cases, and 

include detailed instructions and 

calculation algorithms for hospitals to 

use when collecting and submitting data 

on required measures. These 

semiannual updates are accompanied by 

notifications to users, providing 

sufficient time between the change and 

the effective date in order to allow users 

to incorporate changes and updates to 

the specifications into data collection 

systems. 

3. Public Display of Quality Measures 

Section 1886(b)(3)(B)(viii)(VII) of the 

Act, before it was amended by section 

3001(a)(2)(C) of the Affordable Care Act, 

required that the Secretary establish 

procedures for making data submitted 

under the Hospital IQR program 

available to the public after ensuring 

that a hospital has the opportunity to 

review the data before it is made public. 

To meet this requirement, we have 

displayed most Hospital IQR program 

data on the Hospital Compare website, 

http://www.hospitalcompare.hhs.gov, 

after a 30-day preview period. An 

interactive Web tool, this Web site 

assists beneficiaries by providing 

information on hospital quality of care 

to those who need to select a hospital. 

It further serves to encourage 

beneficiaries to work with their doctors 

and hospitals to discuss the quality of 

care hospitals provide to patients, 

thereby providing an additional 

incentive to hospitals to improve the 

quality of care that they furnish. The 

Hospital Compare website currently 

makes public data on clinical process of 

care measures, risk adjusted outcome 

measures, the HCAHPS patient 

experience of care survey, and structural 

measures. However, data that we believe 

is not suitable for inclusion on Hospital 

Compare because it is not salient or will 

not be fully understood by beneficiaries, 

as well as data for which there are 

unresolved display or design issues may 

be made available on other CMS Web 

sites that are not intended to be used as 

an interactive Web tool, such as http:// 

www.cms.hhs.gov/HospitalQualityInits/. 

In such circumstances, affected parties 

are notified via CMS listservs, CMS email blasts, national provider calls, and 

QualityNet announcements regarding 

the release of preview reports followed 

by the posting of data on a Web site 

other than Hospital Compare. 

D. 2007 Report to Congress: Plan To 

Implement a Medicare Hospital ValueBased Purchasing Program 

Section 5001(b) of the DRA required 

the Secretary to develop a plan to 

implement a value-based purchasing 

program for payments made under the 

Medicare program for subsection (d) 

hospitals. In developing the plan, we 

were required to consider the on-going 

development, selection, and 

modification process for measures of 


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quality and efficiency in hospital 

inpatient settings; the reporting, 

collection, and validation of quality 

data; the structure, size, and sources of 

funding of value-based payment 

adjustments; and the disclosure of 

information on hospital performance. 

In 2007, we submitted to Congress a 

report that discusses options for a plan 

to implement a Medicare hospital VBP 

program that builds on the Hospital IQR 

program. We recommended replacing 

the Hospital IQR program with a new 

program that would include both a 

public reporting requirement and 

financial incentives for better 

performance. We also recommended 

that a hospital VBP program be 

implemented in a manner that would 

not increase Medicare spending. 

To calculate a hospital’s total 

performance score under the plan, we 

analyzed a potential performance 

scoring model that incorporated 

measures from different quality 

‘‘domains,’’ including clinical process of 

care and patient experience of care. We 

examined ways to translate that score 

into an incentive payment by making a 

portion of the base diagnosis-related 

group (DRG) payment contingent on 

performance. We analyzed criteria for 

selecting performance measures and 

considered a potential phased approach 

to transition from Hospital IQR to valuebased purchasing. In addition, we 

examined redesigning the current data 

transmission process and validation 

infrastructure, including making 

enhancements to the Hospital Compare 

Web site, as well as an approach to 

monitor the impact of value-based 

purchasing. 

E. Provisions of the Affordable Care Act 

Section 3001(a) of the Patient 

Protection and Affordable Care Act 

(Pub. L. 111–148), enacted on March 23, 

2010, as amended by the Health Care 

and Education Reconciliation Act of 

2010 (Pub. L. 111–152), enacted on 

March 30, 2010 (collectively known as 

the Affordable Care Act), added a new 

section 1886(o) to the Social Security 

Act (the Act) which requires the 

Secretary to establish a hospital valuebased purchasing program under which 

value-based incentive payments are 

made in a fiscal year to hospitals 

meeting performance standards 

established for a performance period for 

such fiscal year. Both the performance 

standards and the performance period 

for a fiscal year are to be established by 

the Secretary. Section 1886(o)(1)(B) of 

the Act directs the Secretary to begin 

making value-based incentive payments 

under the Hospital VBP program to 

hospitals for discharges occurring on or 

after October 1, 2012. These incentive 

payments will be funded for FY 2013 

through a reduction to FY 2013 base 

operating DRG payments for each 

discharge of 1%, as required by section 

1886(o)(7). Section 1886(o)(1)(C) 

provides that the Hospital VBP program 

applies to subsection (d) hospitals (as 

defined in section 1886(d)(1)(B)), but 

excludes from the definition of the term 

‘‘hospital,’’ with respect to a fiscal year: 

1) a hospital that is subject to the 

payment reduction under section 

1886(b)(3)(B)(viii)(I) for such fiscal year; 

2) a hospital for which, during the 

performance period for the fiscal year, 

the Secretary cited deficiencies that 

pose immediate jeopardy to the health 

and safety of patients; and 3) a hospital 

for which there is not a minimum 

number (as determined by the Secretary) 

of applicable measures for the 

performance period for the fiscal year 

involved, or for which there is not a 

minimum number (as determined by the 

Secretary) of cases for the applicable 

measures for the performance period for 

such fiscal year. 

II. Provisions of the Proposed 

Regulations 

A. Overview of the Proposed Hospital 

VBP Program 

This proposed rule proposes to 

implement a Hospital Value-Based 

Purchasing program (‘‘Hospital VBP 

program’’ or ‘‘the program’’) under 

section 1886(o) of the Social Security 

Act (‘‘Act’’), under which value-based 

incentive payments will be made in a 

fiscal year (beginning FY 2013) to 

hospitals that meet performance 

standards established with respect to a 

performance period ending prior to the 

beginning of such fiscal year. This 

proposed rule was developed based on 

extensive research we conducted on 

hospital value-based purchasing, 

including research that formed the basis 

of a 2007 report we submitted to 

Congress, entitled ‘‘Report to Congress: 

Plan to Implement a Medicare Hospital 

Value-Based Purchasing Program’’ 

(November 21, 2007), a copy of which 

is available on the CMS Web site, and 

takes into account input from both 

stakeholders and other interested 

parties. As described more fully below, 

we are proposing to initially adopt for 

the FY 2013 Hospital VBP program 18 

measures that we have already adopted 

for the Hospital IQR Program, 

categorized into two domains, as 

follows: 17 of the proposed measures 

will be clinical process of care 

measures, which we will group into a 

clinical process of care domain, and 1 

measure will be the HCAHPS survey, 

which will fall under a patient 

experience of care domain. With respect 

to the clinical process of care and 

HCAHPS measures, we are proposing to 

use a three-quarter performance period 

from July 1, 2011 through March 31, 

2012 for the FY 2013 payment 

determination and to determine whether 

hospitals meet the proposed 

performance standards for these 

measures by comparing their 

performance during the proposed 

performance period to their 

performance during a proposed threequarter baseline period from July 1, 

2009 through March 31, 2010. We are 

also proposing to initially adopt for the 

FY 2014 Hospital VBP program three 

outcome measures. With respect to the 

proposed outcome measures, we are 

proposing to use an 18-month 

performance period from July 1, 2011 to 

December 31, 2012. Furthermore, for the 

proposed outcome measures, we are 

proposing to establish performance 

standards and to determine whether 

hospitals meet those standards by 

comparing their performance during the 

proposed performance period to their 

performance during a proposed baseline 

period of July 1, 2008 to December 31, 

2009. 

In general, we are proposing to 

implement a methodology for assessing 

the total performance of each hospital 

based on performance standards, under 

which we will score each hospital based 

on achievement and improvement 

ranges for each applicable measure. 

Additionally, we are proposing to 

calculate a total performance score for 

each hospital by combining the greater 

of the hospital’s achievement or 

improvement points for each measure to 

determine a score for each domain, 

multiplying each domain score by a 

proposed weight (clinical process of 

care: 70 percent, patient experience of 

care: 30 percent), and adding together 

the weighted domain scores. We are 

proposing to convert each hospital’s 

total performance score into a valuebased incentive payment utilizing a 

linear exchange function. All of these 

proposals are addressed in greater detail 

below. 

B. Proposed Performance Period 

Section 1886(o)(4) of the Act requires 

the Secretary to establish a performance 

period for a fiscal year that begins and 

ends prior to the beginning of such 

fiscal year. In considering various 

performance periods that could apply 

for purposes of the fiscal year 2013 

payment adjustments, we recognized 

that hospitals submit data on the chartabstracted measures adopted for the 

Hospital IQR Program on a quarterly 


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1http://www.nationalprioritiespartnership.org/. 

2http://www.hhs.gov/secretary/about/priorities/ 

priorities.html. 

3Chassin, M.R.; Loeb, J.M.; Schmaltz, S.P. and 

Wachter, R.M. (2010) ‘‘Accountability Measures— 

Using Measurement to Promote Quality 

Improvement.’’ New England Journal of Medicine. 

Vol 363: 683–688. 

basis, and for that reason, we would 

propose that the performance period 

commence at the beginning of a quarter. 

We also recognize that we must balance 

the length of the period for collecting 

measure data with the need to 

undertake the rulemaking process in 

order to establish the performance 

period and provide the public with an 

opportunity to meaningfully comment 

on that proposal. With these 

considerations in mind, we concluded 

that July 1, 2011 is the earliest date that 

the performance period could begin. 

We then considered how long the 

performance period should be. Our 

preference would have been to propose 

to use a full year as the performance 

period for the clinical process of care 

and HCAHPS measures we are 

proposing to initially adopt for the FY 

2013 Hospital VBP program, consistent 

with our analysis that using a full year 

performance period provides high levels 

of data accuracy and reliability for 

scoring hospitals on these measures. We 

concluded, however, that this would not 

give us sufficient time to calculate the 

total performance scores, calculate the 

value-based incentive payments, notify 

hospitals regarding their payment 

adjustments, and implement the 

payment adjustments. We subsequently 

analyzed how a shorter performance 

period might affect a hospital’s 

performance score. Using the most 

recent clinical process of care and 

HCAHPS measure data available, we 

examined the feasibility of proposing to 

adopt a one quarter, two quarter, or 

three quarter performance period by 

comparing each of these periods to a 

four quarter baseline period. We did this 

to determine how closely a hospital’s 

total performance score calculated using 

one, two, or three quarters of data would 

approximate what the hospital’s total 

performance score would be if we 

proposed to use four quarters of data. 

Under our analysis, the total 

performance scores approximated using 

three quarters of data closely correlated 

with total performance scores 

approximated using four quarters of 

data. Specifically, our analysis showed 

that the three quarter performance 

period would have a correlation 

coefficient of 0.96815 (p-value .0001), 

while a two quarter performance period 

would have a correlation coefficient of 

0.90358 (p-value .0001). 

We also recognize that under the 

Hospital IQR program, hospitals have 

135 days to submit chart abstracted data 

following the close of each quarter. 

Because we are proposing to implement 

a Hospital VBP program that builds on 

the Hospital IQR program, we would 

like, to the extent possible, to maintain 

our existing Hospital IQR program 

requirements. We believe that the 135 

day time lag supports the adoption of a 

three quarter performance period based 

on the analysis discussed above, and 

that a one or two quarter performance 

period would provide lower data 

accuracy for scoring hospitals and 

adjusting their payments. 

Therefore, we propose to use the 

fourth quarter of FY 2011 (July 1, 2011– 

September 30, 2011) and the first and 

second quarters of FY 2012 (October 1, 

2011–March 31, 2012) as the 

performance period for proposed 

clinical process of care and HCAHPS 

measures we are proposing to initially 

adopt for the FY 2013 Hospital VBP 

program. Hospitals will be scored based 

on how well they perform on the 

proposed clinical process of care and 

HCAHPS measures during this proposed 

performance period. We note that we 

anticipate proposing to use a full year as 

the performance period for the clinical 

process of care and HCAHPS measures 

in the future. For the three mortality 

outcome measures currently specified 

for the Hospital IQR program for the FY 

2011 payment determination (MORT– 

30–AMI, MORT–30–HF, MORT–30–PN) 

that we propose below to adopt for the 

FY 2014 Hospital VBP program payment 

determination, we are proposing to 

establish a performance period of July 1, 

2011 to December 31, 2012. An 

eighteen-month performance period for 

mortality measures is intended to 

ensure the measures’ reliability by 

capturing more cases than could be 

observed over one year of measurement. 

We plan to add additional measures to 

the Hospital VBP program, including 

but not limited to AHRQ and HAC 

measures that have been specified for 

the Hospital IQR program and propose 

that the performance period for those 

measures will begin one year after these 

measures have been displayed on the 

Hospital Compare Web site for the 

reasons discussed below. 

C. Proposed Measures 

Section 1886(o)(2)(A) of the Act 

requires the Secretary to select for the 

Hospital VBP program measures, other 

than readmission measures, from the 

measures specified for the Hospital IQR 

program. Section 1886(o)(2)(B)(i) 

requires the Secretary to ensure that the 

selected measures include measures on 

six specified conditions or topics: Acute 

Myocardial Infarction (AMI); Heart 

Failure (HF); Pneumonia (PN); 

Surgeries, as measured by the Surgical 

Care Improvement Project (SCIP); 

Healthcare-Associated Infections (HAI); 

and, the Hospital Consumer Assessment 

of Healthcare Providers and Systems 

survey (HCAHPS). Section 

1886(o)(2)(C)(i) provides that the 

Secretary may not select a measure with 

respect to a performance period for a 

fiscal year unless the measure has been 

specified under section 

1886(b)(3)(B)(viii) of the Act and 

included on the Hospital Compare 

website for at least one year prior to the 

beginning of the performance period. 

Section 1886(o)(2)(C)(ii) provides that a 

measure selected under section 

1886(o)(2)(A) shall not apply to a 

hospital if the hospital does not furnish 

services appropriate to the measure. 

Our measure development and 

selection activities for the Hospital IQR 

Program take into account national 

priorities, such as those established by 

the National Priorities Partnership,1 and 

the Department of Health and Human 

Services,2 as well as other widely 

accepted criteria established in medical 

literature.3 Because we must select 

measures for the Hospital VBP program 

from the pool of measures that have 

been adopted for the Hospital IQR 

program, the measures to be selected for 

inclusion in Hospital VBP would also 

reflect these priorities. 

In the FY 2011 IPPS/RY 2011 LTCH 

PPS final rule, we stated that in future 

expansions and updates to the Hospital 

IQR program measure set, we would be 

taking into consideration several 

important goals. These goals include: (a) 

Expanding the types of measures 

beyond process of care measures to 

include an increased number of 

outcome measures, efficiency measures, 

and patients’ experience of care 

measures; (b) expanding the scope of 

hospital services to which the measures 

apply; (c) considering the burden on 

hospitals in collecting chart-abstracted 

data; (d) harmonizing the measures used 

in the Hospital IQR program with other 

CMS quality programs to align 

incentives and promote coordinated 

efforts to improve quality; (e) seeking to 

use measures based on alternative 

sources of data that do not require chart 

abstraction or that utilize data already 

being reported by many hospitals, such 

as data that hospitals report to clinical 

data registries, or all payer claims 

databases; and (f) weighing the 

relevance and utility of the measures 

compared to the burden on hospitals in 

submitting data under the Hospital IQR 

program. In addition, we believe that we 


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4See OEI–06–09–00090 ‘‘Adverse Events in 

Hospitals: National Incidence Among Medicare 

Beneficiaries.’’ Department of Health and Human 

Services, Office of Inspector General, November 

2010. See also, 2009 National Healthcare Quality 

Report, pp. 107–122. ‘‘Patient Safety,’’ Agency for 

Healthcare Research and Quality. 

must act with all speed and 

deliberateness to expand the pool of 

measures used in the Hospital VBP 

program. This goal is supported by at 

least two Federal reports documenting 

that tens of thousands of patients do not 

receive safe care in the nation’s 

hospitals.4 For this reason, we believe 

that we need to adopt measures for the 

Hospital VBP program relevant to 

improving care, particularly as these 

measures are directed toward improving 

patient safety, as quickly as possible. 

We believe that speed of 

implementation is a critical factor in the 

success and effectiveness of this 

program. 

The Hospital VBP program that we are 

proposing to implement has been 

developed with the focused intention to 

motivate all subsection (d) hospitals to 

which the program applies to take 

immediate action to improve the quality 

of care they furnish to their patients. 

Because we view as urgent the necessity 

to improve the quality of care furnished 

by these hospitals, and because we 

believe that hospitalized patients in the 

United States currently face patient 

safety risks on a daily basis, we are 

proposing in this proposed rule to adopt 

an initial measure set for the Hospital 

VBP program. However, we are also 

proposing to add additional measures to 

the Hospital VBP program in the future 

in such a way that their performance 

period will begin immediately after they 

are displayed on Hospital Compare for 

a period of time of at least one year, but 

without the necessity of notice and 

comment rulemaking. We propose this 

because of the urgency to improve the 

quality of hospital care, and in order to 

minimize any delay to take substantive 

action in favor of patient safety. The 

details of this proposal are discussed 

below. 

We have stated that for the Hospital 

IQR Program, we give priority to quality 

measures that assess performance on: (a) 

Conditions that result in the greatest 

mortality and morbidity in the Medicare 

population; (b) conditions that are high 

volume and high cost for the Medicare 

program; and (c) conditions for which 

wide cost and treatment variations have 

been reported, despite established 

clinical guidelines. In addition, we 

stated that we seek to select measures 

that address the six quality aims of 

effective, safe, timely, efficient, patientcentered, and equitable healthcare. 

Current and long term priority topics 

include: Prevention and population 

health; safety; chronic conditions; high 

cost and high volume conditions; 

elimination of health disparities; 

healthcare-associated infections and 

other adverse healthcare outcomes; 

improved care coordination; improved 

efficiency; improved patient and family 

experience of care; effective 

management of acute and chronic 

episodes of care; reduced unwarranted 

geographic variation in quality and 

efficiency; and adoption and use of 

interoperable health information 

technology. 

We have also stated that these criteria, 

priorities, and goals are consistent with 

section 1886(b)(3)(B)(viii)(X) of the Act, 

as added by section 3001(a)(2)(D) of the 

Affordable Care Act, which requires the 

Secretary, to the extent practicable and 

with input from consensus 

organizations and other stakeholders, to 

take steps to ensure that the Hospital 

IQR program measures are coordinated 

and aligned with quality measures 

applicable to physicians and other 

providers of services and suppliers 

under Medicare. 

Currently, there are 45 measures 

specified under the Hospital IQR 

program for the FY 2011 payment 

determination. We view all of these 

measures (with the exception of the 

measures of readmission) as ‘‘candidate 

measures’’ for the Hospital VBP 

program. We recognize that we cannot 

add any measure to the program unless 

it meets the requirements of section 

1886(o). In determining what measures 

to initially propose for the FY 2013 

Hospital VBP program we considered 

several factors. First, a measure must be 

included on the Hospital Compare Web 

site for at least one year prior to the 

beginning of the performance period 

and specified under the Hospital IQR 

program. The SCIP–Inf-9 and 10 

measures do not meet this requirement 

nor do any of the nine (previously ten 

given the Nursing Sensitive Care— 

Failure to Rescue measure was 

harmonized with the Death Among 

Surgical Patients with Serious, treatable 

Complications) Agency for Healthcare 

Research and Quality (AHRQ) measures. 

Therefore, these measures were not 

considered candidate measures. It is our 

intention to add measures to the 

Hospital VBP program as soon as this 

requirement is met in order to help 

improve patient care as quickly as 

possible. 

As noted above, we recognize that we 

cannot include in the measure set any 

readmission measures in accordance 

with section 1886(o)(2)(A) of the Act. 

We also are not proposing at this time 

to adopt the current Hospital IQR 

structural measures because we believe 

that these measures require further 

development if they are to be used for 

the Hospital VBP program. We seek 

public comment at this time on the 

possible utility of adopting structural 

measures for the Hospital VBP program 

measure set and how these measures 

might contribute to the improvement of 

patient safety and quality of care. Table 

1 contains a list of the remaining initial 

eligible measures. 

TABLE 1—INITIAL ELIGIBLE MEASURES FOR THE FY 2013 HOSPITAL VBP PROGRAM

Measure ID Measure description 

Process Measures 

AMI–1 .............................................. Aspirin at Arrival. 

AMI–2 .............................................. Aspirin Prescribed at Discharge. 

AMI–3 .............................................. ACE/ARB Inhibitor. 

AMI–4 .............................................. Adult Smoking Cessation Advice/Counseling. 

AMI–5 .............................................. Beta Blocker Prescribed at Discharge. 

AMI–7a ............................................ Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. 

AMI–8a ............................................ Primary PCI Received Within 90 Minutes of Hospital Arrival. 

HF–1 ............................................... Discharge Instructions. 

HF–2 ............................................... Evaluation of LVS Function. 

HF–3 ............................................... ACEI or ARB for LVSD. 

HF–4 ............................................... Adult Smoking Cessation Advice/Counseling. 


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TABLE 1—INITIAL ELIGIBLE MEASURES FOR THE FY 2013 HOSPITAL VBP PROGRAM—Continued 

Measure ID Measure description 

PN–2 ............................................... Pneumococcal Vaccination. 

PN–3b ............................................. Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic Received in Hospital. 

PN–4 ............................................... Adult Smoking Cessation Advice/Counseling. 

PN–5c ............................................. Timing of Receipt of Initial Antibiotic Following Hospital Arrival. 

PN–6 ............................................... Initial Antibiotic Selection for CAP in Immunocompetent Patient. 

PN–7 ............................................... Influenza Vaccination. 

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. 

SCIP–Inf-4 ....................................... Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. 

SCIP–Inf-6 ....................................... Surgery Patients with Appropriate Hair Removal. 

SCIP–Card-2 ................................... Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker During the Perioperative 

Period. 

SCIP–VTE–1 ................................... Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered. 

SCIP–VTE–2 ................................... Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior 

to Surgery to 24 Hours After Surgery. 

Outcome Measures 

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. 

Survey Measures 

HCAHPS ......................................... Hospital Consumer Assessment of Healthcare Providers and Systems Survey. 

To determine which measures we 

would propose to initially adopt for the 

FY 2013 Hospital VBP program, we then 

examined whether any of the eligible 

Hospital IQR measures (table above) 

should be excluded from the Hospital 

VBP program measure set because 

hospital performance on them is 

‘‘topped out,’’ meaning that all but a few 

hospitals have achieved a similarly high 

level of performance on them. We 

believe that measuring hospital 

performance on topped-out measures 

will have no meaningful effect on a 

hospital’s total performance score. 

Scoring a topped-out measure for 

purposes of the Hospital VBP program 

would also present a number of 

challenges. First, as we discuss below, 

we are proposing that the benchmark 

performance standard for all measures 

will be the performance at the mean of 

the top decile (defined in section II. E. 

of this proposed rule). Applied to a 

topped-out measure, the benchmark 

would be statistically indistinguishable 

from the highest attainable score for the 

measure and, in our view, could lead to 

unintended consequences as hospitals 

strive to meet the benchmark. Examples 

of unintended consequences could 

include, but are not limited to, 

inappropriate delivery of a service to 

some patients (such as delivery of 

antibiotics to patients without a 

confirmed diagnosis of pneumonia), 

unduly conservative decisions on 

whether to exclude some patients from 

the measure denominator, and a focus 

on meeting the benchmark at the 

expense of actual improvements in 

quality or patient outcomes. Second, we 

have found that for topped-out 

measures, it is significantly more 

difficult to differentiate among hospitals 

performing above the median. Third, 

because a measure cannot be applied to 

a hospital unless the hospital furnishes 

services appropriate to the measure, 

data reporting under the Hospital VBP 

program will not be the same for all 

hospitals. To the extent that a hospital 

can report a higher proportion of 

topped-out measures, for which its 

scores would likely be high, we believe 

that such a hospital would be unfairly 

advantaged in the determination of its 

total performance score. 

To determine whether an eligible 

Hospital IQR measure is topped out, we 

initially focused on the top distribution 

of hospital performance on each 

measure and noted if their 75th and 

90th percentiles were statistically 

indistinguishable. Based on our 

analysis, we identified 7 topped-out 

measures: AMI–1 Aspirin at Arrival; 

AMI–5 Beta Blocker at Discharge; AMI– 

3 ACEI or ARB at Discharge; AMI–4 

Smoking Cessation; HF–4 Smoking 

Cessation; PN–4 Smoking Cessation; 

and SCIP–Inf-6 Surgery Patients with 

Appropriate Hair Removal. We then 

observed that two of these measures 

identified as topped out (AMI–3 ACEI or 

ARB at Discharge and HF–4 Smoking 

Cessation) had significantly lower mean 

scores than the others, which led us to 

question whether our analysis was too 

focused on the top ends of distributions 

and whether additional criteria that 

could account for the entire distribution 

might be more appropriate. To address 

this, we analyzed the truncated 

coefficient of variation for each of the 

measures. The coefficient of variation 

(CV) is a common statistic that 

expresses the standard deviation as a 

percentage of the sample mean in a way 

that is independent of the units of 

observation. Applied to this analysis, a 

large CV would indicate a broad 

distribution of individual hospital 

scores, with large and presumably 

meaningful differences between 

hospitals in relative performance. A 

small CV would indicate that the 

distribution of individual hospital 

scores is clustered tightly around the 

mean value, suggesting that it is not 

useful to draw distinctions between 

individual hospital performance scores. 

We used a modified version of the CV, 

namely a truncated CV, for each 

measure, in which the five percent of 

hospitals with the lowest scores, and the 

five percent of hospitals with highest 

scores were first truncated (set aside) 

before calculating the CV. This was 

done to avoid undue effects of the 

highest and lowest outlier hospitals, 

which if included, would tend to greatly 

widen the dispersion of the distribution 

and make the measure appear to be 

more reliable or discerning. For 

example, a measure for which most 

hospital scores are tightly clustered 


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around the mean value (a small CV) 

might actually reflect a more robust 

dispersion if there were also a number 

of hospitals with extreme outlier values, 

which would greatly increase the 

perceived variance in the measure. 

Accordingly, the truncated CV was 

added as an additional criterion 

requiring that a topped-out measure also 

exhibit a truncated CV < 0.10. Using 

both the truncated CV and data showing 

whether hospital performance at the 

75th and 90th percentiles was 

statistically indistinguishable, we 

reexamined the available measures and 

determined that the same seven 

measures continue to meet our proposed 

definition for being topped-out. 

Our priorities for the Hospital VBP 

program are to transform how Medicare 

pays for care and to encourage hospitals 

to continually improve the quality of 

care they furnish. Our analysis of the 

impact of including the topped-out 

measures discussed above shows that 

their use would mask true performance 

differences among hospitals and, as a 

result, would fail to advance these 

priorities. Therefore, we are proposing 

to not include these 7 topped-out 

measures (AMI–1 Aspirin at Arrival; 

AMI–5 Beta Blocker at Discharge; AMI– 

3 ACEI or ARB at Discharge; AMI–4 

Smoking Cessation; HF–4 Smoking 

Cessation; PN–4 Smoking Cessation; 

and SCIP–Inf-6 Surgery Patients with 

Appropriate Hair Removal) in the list of 

measures we are proposing to initially 

adopt for the FY 2013 Hospital VBP 

program. 

We examined whether the following 

outcome measures adopted for the 

Hospital IQR program are appropriate 

for inclusion in the FY 2013 Hospital 

VBP program. These measures are as 

follows: (1) AHRQ patient safety 

indicators (PSIs), inpatient quality 

indicators (IQIs) and composite 

measures; (2) AHRQ PSI and nursing 

sensitive care measure; and (3) AMI, HF, 

and PN mortality measures (Medicare 

patients). We believe that these outcome 

measures provide important information 

relating to treatment outcomes and 

patient safety. We also believe that 

adding these outcome measures would 

significantly improve the correlation 

between patient outcomes and Hospital 

VBP performance. However, because 

under section 1886(o)(2)(C)(i) of the Act, 

we may only select measures if they 

have been included on the Hospital 

Compare Internet website for a least one 

year prior to the beginning of the 

performance period, we believe that the 

AHRQ Patient Safety Indicators (PSI) 

and Inpatient Quality Indicators (IQI) 

and composite measures, and the AHRQ 

Nursing Sensitive Care measure are not 

yet eligible for inclusion in the FY 2013 

Hospital VBP program. These measures 

are currently specified for the Hospital 

IQR program but have not yet been 

included on Hospital Compare. Because 

of the urgency to act quickly to improve 

patient safety, we plan to adopt them for 

use in the Hospital VBP Program as 

rapidly as possible and will continue 

working to develop additional robust 

outcome measures for the Hospital VBP 

program. We invite comments on the 

addition of the AHRQ PSI, IQI, and 

Nursing Sensitive Care measures for 

Hospital VBP program inclusion in FY 

2014 and future years. 

We considered whether the current 

publicly-reported 30-day mortality 

claims-based measures (Mort–30–AMI, 

Mort–30–HF, Mort–30–PN) should be 

included in the FY 2013 Hospital VBP 

program. The mortality measures assess 

hospital-specific, risk-standardized, allcause 30-day mortality rates for patients 

hospitalized with a principal diagnosis 

of heart attack, heart failure, and 

pneumonia. All-cause mortality is 

defined for purposes of these measures 

as death from any cause within 30 days 

after the index admission date, 

regardless of whether the patient died 

while still in the hospital or after 

discharge. On July 1, 2009, the 

specifications for these measures were 

changed from a one-year reporting 

period to a three-year rolling average. 

This was done to address concerns 

regarding the reliability of the measures, 

and the three-year rolling average allows 

us to include a larger number of cases 

in the measure calculations, although 

our analysis shows that eighteen months 

of these data is also reliable. We do not 

believe that the three-quarter 

performance period we are proposing to 

use for the initial clinical process of care 

and HCAHPS measures for the FY 2013 

Hospital VBP program would be 

appropriate to use for these mortality 

outcome measures because we do not 

believe that the data collected for these 

mortality measures during those three 

quarters will provide us with 

sufficiently accurate information about a 

hospital’s outcomes on which to score 

hospitals on these measures and base 

payment. The detailed methodology for 

the 30-day risk standardized mortality 

measures is available on http:// 

www.qualitynet.org. 

However, we propose to adopt these 

currently reported 30-day mortality 

claims-based measures (MORT–30– 

AMI, MORT–30–HF, and MORT–30– 

PN) as measures for the FY 2014 

Hospital VBP program and, as proposed 

above, to establish a performance period 

with respect to these measures of July 1, 

2011 to December 31, 2012. 

The eligible clinical process of care 

measures that have not been excluded 

for reasons previously discussed cover 

acute myocardial infarction, heart 

failure, pneumonia, and surgeries (as 

measured by the Surgical Care 

Improvement Project (SCIP)). Therefore, 

we believe that they meet the 

requirements in section 

1886(o)(2)(B)(i)(I)(aa)–(dd) of the Act. 

Section 1886(o)(2)(B)(i)(ee) of the Act 

requires the Secretary to also select for 

purposes of the FY 2013 Hospital VBP 

program measures that cover healthcareassociated infections (HAI) ‘‘as 

measured by the prevention metrics and 

targets established in the HHS Action 

Plan to Prevent Healthcare-Associated 

Infections (or any successor plan) of the 

Department of Health and Human 

Services.’’ The SCIP measures that we 

discuss above were developed to 

support practices that have 

demonstrated an ability to significantly 

reduce surgical complications such as 

HAIs. Compliance with these SCIP 

infection measures is also included as a 

targeted metric in the HHS Action Plan 

to Prevent Healthcare-Associated 

Infections issued in 2009, available on 

the HHS website. As a result, we believe 

that the SCIP–Inf-1; SCIP–Inf-2; SCIP– 

Inf-3; and SCIP–Inf-4 measures we have 

adopted for the Hospital IQR program 

meet the requirement in section 

1886(o)(2)(B)(i)(I)(ee) and we propose to 

categorize them under a HAI condition 

topic instead of under the SCIP 

condition topic. 

Under section 1886(o)(2)(B)(i)(II), the 

Secretary must select measures for the 

FY 2013 Hospital VBP program related 

to the Hospital Consumer Assessment of 

Healthcare Providers and Systems 

survey (HCAHPS). CMS partnered with 

the Agency for Healthcare Research and 

Quality (AHRQ) to develop HCAHPS. 

The HCAHPS survey is the first 

national, standardized, publicly 

reported survey of patients’ experiences 

of hospital care, and we propose to 

adopt it for the FY 2013 Hospital VBP 

program. HCAHPS, also known as the 

CAHPS® Hospital Survey, is a survey 

instrument and data collection 

methodology for measuring patients’ 

perceptions of their hospital experience. 

The HCAHPS survey asks discharged 

patients 27 questions about their recent 

hospital stay that are used to measure 

the experience of patients across 10 

dimensions in the Hospital IQR 

program. The survey contains 18 core 

questions about critical aspects of 

patients’ hospital experiences 

(communication with nurses and 

doctors, the responsiveness of hospital 

staff, the cleanliness and quietness of 

the hospital environment, pain 


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management, communication about 

medicines, discharge information, 

overall rating of the hospital, and 

whether they would recommend the 

hospital). The survey also includes four 

items to direct patients to relevant 

questions if a patient did not have a 

particular experience covered by the 

survey, such as taking new medications 

or needing medicine for pain. Three 

items in the survey are used to adjust for 

the mix of patients across hospitals, and 

two items related to race and ethnicity 

support congressionally-mandated 

reports on disparities in health care. 

The HCAHPS survey is administered 

to a random sample of adult patients 

across medical conditions between 48 

hours and six weeks after discharge; the 

survey is not restricted to Medicare 

beneficiaries. Hospitals must survey 

patients throughout each month of the 

year. The survey is available in official 

English, Spanish, Chinese, Russian and 

Vietnamese versions. The survey and its 

protocols for sampling, data collection 

and coding, and file submission can be 

found in the HCAHPS Quality 

Assurance Guidelines, Version 5.0, 

which is available on the official 

HCAHPS website, http:// 

www.hcahpsonline.org. 

AHRQ carried out a rigorous, 

scientific process to develop and test the 

HCAHPS instrument. This process 

entailed multiple steps, including: A 

public call for measures; literature 

review; cognitive interviews; consumer 

focus groups; stakeholder input; a threestate pilot test; small-scale field tests; 

and soliciting public comments via 

several Federal Register notices. In May 

2005, the HCAHPS survey was endorsed 

by the National Quality Forum (NQF). 

CMS adopted the entire HCAHPS 

survey as a measure in the Hospital IQR 

program in October 2006, and the first 

public reporting of HCAHPS results 

occurred in March 2008. The survey, its 

methodology and the results it produces 

are available on the HCAPHS website at 

http://www.hcahpsonline.org/ 

home.aspx. With respect to our display 

of the HCAHPS measure on Hospital 

Compare for purposes of the Hospital 

IQR program, we publicly report the 

measure as 10 separate items. The 

‘‘cleanliness of hospital environment,’’ 

‘‘quietness of hospital environment,’’ 

‘‘overall rating of the hospital,’’ and 

‘‘recommend the hospital’’ survey items 

are displayed as stand-alone items. The 

remaining 6 items (communication with 

nurses, communication with doctors, 

responsiveness of hospital staff, pain 

management, communication about 

medicines, discharge information) are 

composites of the remaining survey 

items. 

Finally, we propose to not include the 

PN–5c measure in the Hospital VBP 

program. We do not believe that this 

measure is appropriate for inclusion 

because it could lead to inappropriate 

antibiotic use. We intend to propose to 

retire this measure, as well as several 

other measures that we are not 

proposing to adopt for the Hospital VBP 

program, from the Hospital IQR program 

in the near future. 

Accordingly, we propose to initially 

select the following 17 clinical process 

of care measures, and the HCAHPS 

measure, for inclusion in the FY 2013 

Hospital VBP program. The proposed 

list of initial measures is provided in 

Table 2. 

TABLE 2—PROPOSED INITIAL MEASURES FOR FY 2013 HOSPITAL VBP PROGRAM

Measure ID Measure description 

Clinical Process of Care Measures 

Acute myocardial infarction: 

AMI–2 ................................................................................. Aspirin Prescribed at Discharge. 

AMI–7a ............................................................................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. 

AMI–8a ............................................................................... Primary PCI Received Within 90 Minutes of Hospital Arrival. 

Heart Failure: 

HF–1 ................................................................................... Discharge Instructions. 

HF–2 ................................................................................... Evaluation of LVS Function. 

HF–3 ................................................................................... ACEI or ARB for LVSD. 

Pneumonia: 

PN–2 .................................................................................. Pneumococcal Vaccination. 

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. 

PN–7 .................................................................................. Influenza Vaccination. 

Healthcare-associated infections: 

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. 

SCIP–Inf-4 .......................................................................... Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose. 

Surgeries: 

SCIP–Card-2 ...................................................................... Surgery Patients on a Beta Blocker Prior to Arrival That Received a Beta Blocker 

During the Perioperative Period. 

SCIP–VTE–1 ...................................................................... Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered. 

SCIP–VTE–2 ...................................................................... Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis 

Within 24 Hours Prior to Surgery to 24 Hours After Surgery. 

Survey Measures 

HCAHPS ............................................................................ Hospital Consumer Assessment of Healthcare Providers and Systems Survey.5

5Proposed dimensions of the 

HCAHPS survey for use in the FY 2013 

Hospital VBP program include: 

Communication with Nurses, 

Communication with Doctors, 

Responsiveness of Hospital Staff, Pain 

Management, Communication about 

Medicines, Cleanliness and Quietness of 

Hospital Environment, Discharge 


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Information and Overall Rating of 

Hospital. 

We solicit public comments on these 

proposed measures and also on our 

intention to add additional measures to 

the Hospital VBP Program as rapidly as 

possible going forward. To that end, we 

are proposing to implement a 

subregulatory process to expedite the 

timeline for adding measures to the 

Hospital VBP program beginning with 

the FY 2013 program. Under this 

process we could add any measure to 

the Hospital VBP program if that 

measure is adopted under the Hospital 

IQR program and has been included on 

the Hospital Compare Web site for at 

least one year. We are proposing that the 

performance period for all of these 

measures would start exactly one year 

after the date these measures are 

publicly posted on Hospital Compare, 

consistent with section 1886(o)(2)(C)(i). 

Under this proposed subregulatory 

process, we would solicit comments 

from the public on the appropriateness 

of adopting one or more Hospital IQR 

measures for the Hospital VBP program. 

We would also assess the Hospital IQR 

measure rates using the criteria we used 

to select the proposed measures for the 

initial FY 2013 Hospital VBP measure 

set and notify the public regarding our 

findings. We would propose 

performance period end dates for any 

measure we selected for Hospital VBP 

program in rulemaking. We are also 

proposing to implement a subregulatory 

process to retire Hospital VBP measures. 

Under this process, we would post our 

intention to retire measures on the CMS 

Web site at least 60 days prior to the 

date that we will retire the measure. We 

would also, as we do with respect to 

Hospital IQR measures that we believe 

pose immediate patient safety concerns 

if reporting on them is continued, notify 

hospitals and the public of the 

retirement of the measure and the 

reasons for its retirement through the 

usual hospital and QIO communication 

channels used for the Hospital IQR 

program, which include e-mail blasts to 

hospitals and the dissemination of 

Standard Data Processing System 

(SDPS) memoranda to QIOs, as well as 

posting the information on the 

QualityNet Web site. We would then 

confirm the retirement of the measure 

from the Hospital VBP program measure 

set in a rulemaking vehicle. We make 

this proposal because it will allow us to 

ensure that the Hospital VBP program 

measure set focuses on the most current 

quality improvement and patient safety 

priorities. We are seeking public 

comment on our proposals and other 

methods that allow for the addition of 

measures to the Hospital VBP program 

as rapidly as possible in order to 

improve quality and safety for patients. 

For value-based incentive payments 

made with respect to discharges 

occurring during FY 2014 or a 

subsequent fiscal year, CMS is required 

by statute to ensure that the measures 

selected for the Hospital VBP program 

include efficiency measures, including 

measures of ‘‘Medicare Spending per 

beneficiary.’’ CMS solicits public 

comment as to what services should be 

included and what should be excluded 

in a ‘‘Medicare spending per 

beneficiary’’ calculation. For example, 

the calculation could include outlier 

payments and/or Part B payments for 

services furnished during an inpatient 

hospital stay, or could include Part A 

and Part B payments for services 

received by a beneficiary during some 

window of time prior to the admission 

and/or after the discharge. We also 

solicit public comment on what, if any, 

type(s) of hospital segmentation or 

adjustment should be considered. 

In addition, we are considering 

different approaches for measuring 

internal hospital efficiency. Internal 

hospital efficiency measures could 

assess hospital spending per admission, 

as determined using cost reports or 

other sources. CMS seeks comment on 

this and other approaches for measuring 

internal hospital efficiency. 

D. Proposed Performance Standards 

Section 1886(o)(3)(A) requires the 

Secretary to establish performance 

standards with respect to the measures 

selected under the Hospital VBP 

program for a performance period for a 

fiscal year. The performance standards 

must include levels of achievement and 

improvement (section 1886(o)(3)(B)), 

and must be established and announced 

not later than 60 days prior to the 

beginning of the performance period for 

the fiscal year involved (section 

1886(o)(3)(C)). Achievement and 

improvement levels are discussed more 

fully in section II. E. of this proposed 

rule. In addition, as part of the process 

for establishing the performance 

standards, the Secretary must take into 

account appropriate factors, such as: (1) 

Practical experience with the measures, 

including whether a significant 

proportion of hospitals failed to meet 

the performance standard during 

previous performance periods; (2) 

historical performance standards; (3) 

improvement rates; and (4) the 

opportunity for continued improvement 

(section 1886(o)(3)(D)). 

To determine what the proposed 

performance standard for each proposed 

clinical process of care measure and the 

proposed HCAHPS measure should be 

for purposes of the FY 2013 Hospital 

VBP program, we analyzed the most 

reliable and current hospital data that 

we have on each of these measures by 

virtue of the Hospital IQR program. 

Because we are proposing to adopt a 

performance period that is less than a 

full year for FY 2013, we were also 

sensitive to the fact that hospital 

performance on the proposed measures 

may be affected by seasonal variations 

in patient mix, case severity, and other 

factors. 

To address this potential variation 

and ensure that the hospital scores 

reflect their actual performance on the 

measures, we believe that the 

performance standard for each clinical 

process of care measure and HCAHPS 

should be based on how well hospitals 

performed on the measure during the 

same three quarters in a baseline period. 

In determining what three-quarter 

baseline period would be the most 

appropriate to propose to use for the FY 

2013 Hospital VBP program, we wanted 

to ensure that the baseline would be as 

close in time to the proposed 

performance period as possible. We 

believe that selecting a three-quarter 

baseline period from July 1, 2009 to 

March 31, 2010 will enable us to 

achieve this goal. Although the 

proposed baseline period has ended, we 

are still in the process of validating this 

data and expect the validation process 

to be complete by the end of January 

2011. 

We also believe that an essential goal 

of the Hospital VBP program is to 

provide incentives to all hospitals to 

improve the quality of care that they 

furnish to their patients. In determining 

what level of hospital performance 

would be appropriate to select as the 

performance standards for each 

measure, we focused on selecting levels 

that would challenge hospitals to 

continuously improve or maintain high 

levels of performance. As required by 

Section 1886(o)(3)(D), we specifically 

considered hospitals’ practical 

experience with the measures, 

particularly through the Hospital IQR 

program, examining how different 

achievement and improvement 

thresholds would have historically 

impacted hospitals, how hospital 

performance may have changed over 

time, and how hospitals could continue 

to improve. For these reasons, we 

propose to set the achievement 

performance standard (achievement 

threshold) for each proposed measure at 

the median of hospital performance 

(50th percentile) during the baseline 

period of July 1, 2009 through March 31, 

2010. As proposed in section II. E. of 


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this proposed rule, hospitals would 

receive achievement points only if they 

exceed the achievement performance 

standard and could increase their 

achievement score based on higher 

levels of performance. We believe these 

achievement performance standards 

represent achievable standards of 

excellence. We also propose to set the 

improvement performance standard 

(improvement threshold) for each 

proposed measure at each specific 

hospital’s performance on the measure 

during the proposed baseline period of 

July 1, 2009 through March 31, 2010. 

We believe that these improvement 

performance standards ensure that 

hospitals will be adequately 

incentivized to improve. 

Because our process for validating the 

proposed baseline period of data is not 

yet complete, we are unable to provide 

the precise achievement threshold 

values for what these performance 

standards will be at this time. These 

values will be specified in the final rule. 

We specify example achievement 

performance standards, using July 1, 

2008 through March 31, 2009 data, in 

Table 3 below. 

TABLE 3—EXAMPLE ACHIEVEMENT PERFORMANCE STANDARDS FOR FY 2013 HOSPITAL VBP PROPOSED MEASURES

Measure ID Measure description 

Example 

performance 

standard 

Process Measures 

AMI–2 ...................................................... Aspirin Prescribed at Discharge ................................................................................ 0.987 

AMI–7a .................................................... Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival ....................... 0.673 

AMI–8a .................................................... Primary PCI Received Within 90 Minutes of Hospital Arrival ................................... 0.856 

HF–1 ........................................................ Discharge Instructions ............................................................................................... 0.872 

HF–2 ........................................................ Evaluation of LVS Function ....................................................................................... 0.983 

HF–3 ........................................................ ACEI or ARB for LVSD ............................................................................................. 0.944 

PN–2 ........................................................ Pneumococcal Vaccination ....................................................................................... 0.929 

PN–3b ...................................................... Blood Cultures Performed in the Emergency Department Prior to Initial Antibiotic 

Received in Hospital.

0.951 

PN–6 ........................................................ Initial Antibiotic Selection for CAP in Immunocompetent Patient ............................. 0.909 

PN–7 ........................................................ Influenza Vaccination ................................................................................................ 0.909 

SCIP–Inf-1 ............................................... Prophylactic Antibiotic Received Within One Hour Prior to Surgical Incision .......... 0.955 

SCIP–Inf-2 ............................................... Prophylactic Antibiotic Selection for Surgical Patients .............................................. 0.978 

SCIP–Inf-3 ............................................... Prophylactic Antibiotics Discontinued Within 24 Hours After Surgery End Time ..... 0.927 

SCIP–Inf-4 ............................................... Cardiac Surgery Patients with Controlled 6AM Postoperative Serum Glucose ....... 0.912 

SCIP–VTE–1 ........................................... Surgery Patients with Recommended Venous Thromboembolism Prophylaxis Ordered.0.938 

SCIP–VTE–2 ........................................... Surgery Patients Who Received Appropriate Venous Thromboembolism Prophylaxis Within 24 Hours Prior to Surgery to 24 Hours After Surgery.0.913 

Survey Measures 

HCAHPS .................................................. Hospital Consumer Assessment of Healthcare Providers and Systems Survey .....

• Communication with Nurses ..................................................................................

• Communication with Doctors .................................................................................

• Responsiveness of Hospital Staff ..........................................................................

• Pain Management ..................................................................................................

• Communication About Medicines ..........................................................................

• Cleanliness and Quietness of Hospital Environment ............................................

• Discharge Information ............................................................................................

• Overall Rating of Hospital ......................................................................................

.500 

We also propose to use an 18-month 

performance period of July 1, 2011 to 

December 31, 2012, with a baseline 

period of July 1, 2008 to December 31, 

2009, for the mortality measures 

(MORT–30–AMI, MORT–30–HF, 

MORT–30–PN) we are proposing to 

initially include in the FY 2014 Hospital 

VBP program. Like the proposed clinical 

process of care and HCAHPS measures, 

we propose to set the achievement 

performance standard (achievement 

threshold) for each proposed outcome 

measure at the median of hospital 

performance (50th percentile) during 

the proposed baseline period. Similarly, 

we propose to set the improvement 

performance standard (improvement 

threshold) for each proposed outcome 

measure at each specific hospital’s 

performance on each measure during 

the proposed baseline period of July 1, 

2008 to December 31, 2009. We provide 

the following sample achievement 

thresholds, (displayed as survival rates) 

derived from July 2006–July 2009 as 

examples of the achievement 

performance standards for that period: 

• MORT–30–AMI: 83.7% 

• MORT–30–HF: 88.8% 

• MORT–30–PN: 88.5%. 

We solicit public comments on the 

proposed performance standards as 

described above. 

E. Proposed Methodology for 

Calculating the Total Performance Score 

1. Statutory Provisions—Proposed 

Methodology for Calculating the Total 

Performance Score 

Section 1886(o)(5)(A) of the Act 

requires the Secretary to develop a 

methodology for assessing each 

hospital’s total performance based on 

performance standards with respect to 

the measures selected for a performance 

period. Using such methodology, the 

Secretary must provide for an 

assessment for each hospital for each 

performance period. Section 

1886(o)(5)(B) of the Act sets forth four 

additional requirements related to the 

scoring methodology developed by the 


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6The report may be found at http://www.cms.gov/ 

AcuteInpatientPPS/downloads/ 

HospitalVBPPlanRTCFINALSUBMITTED2007.pdf. 

Secretary under section 1886(o)(5)(A). 

Specifically, section 1886(o)(5)(B)(i) 

requires the Secretary to ensure that the 

application of the scoring methodology 

results in an appropriate distribution of 

value-based incentive payments among 

hospitals receiving different levels of 

hospital performance scores, with 

hospitals achieving the highest hospital 

performance scores receiving the largest 

value-based incentive payments. 

Section 1886(o)(5)(B)(ii) provides that 

under the methodology, the hospital 

performance score must be determined 

using the higher of its achievement or 

improvement score for each measure. 

Section 1886(o)(5)(B)(iii) requires that 

the hospital scoring methodology 

provide for the assignment of weights 

for categories of measures as the 

Secretary deems appropriate. Section 

1886(o)(5)(B)(iv) prohibits the Secretary 

from setting a minimum performance 

standard in determining the hospital 

performance score for any hospital. 

Finally, section 1886(o)(5)(B)(v) requires 

that the hospital performance score for 

a hospital reflect the measures that 

apply to the hospital. 

2. Additional Factors for 

Consideration—Proposed Methodology 

for Calculating the Total Performance 

Score 

In addition to statutory requirements, 

we also considered several additional 

factors when developing the proposed 

performance scoring methodology for 

the Hospital Value-Based Purchasing 

program. First, we believe it is 

important that the performance scoring 

methodology is straight forward and 

transparent to hospitals, patients, and 

other stakeholders. Hospitals must be 

able to clearly understand performance 

scoring methods and performance 

expectations to maximize quality 

improvement efforts. The public must 

understand performance score methods 

to utilize publicly reported information 

when choosing hospitals. Second, we 

believe the scoring methodologies for all 

Medicare Value-Based Purchasing 

programs, including (but not limited to) 

the End Stage Renal Disease Quality 

Incentive Program (42 CFR Part 413) 

should be aligned as appropriate given 

their specific statutory requirements. 

This alignment will facilitate the 

public’s understanding of quality 

information disseminated in these 

programs and foster more informed 

consumer decision making about health 

care. Third, we believe differences in 

performance scores must reflect true 

differences in performance. In order to 

ensure this in the proposed Hospital 

Value-Based Purchasing Program, we 

assessed the quantitative characteristics 

of the measures we are proposing to use 

to calculate a performance score, 

including the current state of measure 

development, distribution of current 

hospital performance in the proposed 

measure set, number of measures, and 

the number and grouping of measure 

domains. Fourth, we must appropriately 

measure both quality achievement and 

improvement in our Hospital ValueBased Purchasing program. Section 

1886(o)(5)(B)(ii) of the Act specifies that 

performance scores under the Hospital 

Value-Based Purchasing program be 

calculated utilizing the higher of 

achievement and improvement scores 

for each measure, and that explicit 

direction has implications for the design 

of the performance scoring 

methodology. We must also consider the 

impact of performance scores utilizing 

achievement and improvement on 

hospital behavior due to payment 

implications. Fifth, we wish to 

eliminate unintended consequences for 

rewarding inappropriate hospital 

behavior and outcomes to patients in 

our performance scoring methodology. 

Sixth, we wish to utilize the most 

currently available data to assess 

hospital improvement in a performance 

score methodology. We believe that 

more current data would result in a 

more accurate performance score, but 

recognize that hospitals require time to 

abstract and collect quality information. 

We also require time to process this 

information accurately. 

This proposed rule’s method for 

calculating the improvement score relies 

on a comparison of the current payment 

year’s performance period with a 

‘‘baseline’’ period of July 1, 2008 through 

December 31, 2009 for the three 30-day 

mortality measures, rather than a 

comparison of the current year with the 

previous year (as outlined in the 2007 

report to Congress). We propose this 

baseline period because these data are 

the most currently available data at this 

time for public comment. We plan to 

propose future annual updates to the 

baseline period through future 

rulemaking. We recognize that 

comparing a payment year’s 

performance period with the previous 

year’s performance period may be a 

better estimate of incremental 

improvement. As noted above, we 

solicit comment on the merits and 

impact of all of the factors related to our 

performance score methodology 

alternatives, including the choice of 

how to define the baseline year. 

We solicit comment on the merits and 

impact of all of these factors related to 

our performance score methodology 

alternatives described in the next 

section of this proposed rule. 

Specifically, we welcome suggestions 

on improving the simplicity of the 

Hospital Value-Based Purchasing 

program performance score 

methodology and its alignment with 

other CMS Value-Based Purchasing 

programs. We recognize that statutorily 

mandated differences may require 

differences in performance score 

methodologies among the CMS ValueBased Purchasing programs. 

3. Background—Proposed FY 2013 

Hospital VBP Program Scoring 

Methodology 

In November 2007, CMS published a 

report entitled, ‘‘Report to Congress: 

Plan to Implement a Medicare Hospital 

Value-Based Purchasing Program’’ 

(referred to in this proposed rule as the 

‘‘2007 Report to Congress’’).6 In addition 

to laying the groundwork for hospital 

value-based purchasing, the 2007 Report 

to Congress analyzed and presented a 

potential performance scoring 

methodology (called the Performance 

Assessment Model) for the Hospital VBP 

program. The Performance Assessment 

Model combines scores on individual 

measures across different quality 

categories or ‘‘domains’’ (for example, 

clinical process of care, patient 

experience of care) to calculate a 

hospital’s total performance score. The 

Performance Assessment Model 

provides a methodology for evaluating a 

hospital’s performance on each quality 

measure based on the higher of an 

attainment score in the measurement 

period or an improvement score, which 

is determined by comparing the 

hospital’s current measure score with a 

baseline period of performance. The use 

of an improvement score is intended to 

provide an incentive for a broad range 

of hospitals that participate in a hospital 

VBP program by awarding points for 

showing improvement on quality 

measures, not solely for outperforming 

other hospitals. 

Under the Performance Assessment 

Model, measures are grouped into 

domains, for example, clinical process 

of care (which could include AMI, HF, 

PN, and SCIP) and patient experience of 

care (for example, HCAHPS). A score is 

calculated for each domain by 

combining the measure scores within 

that domain, weighting each measure 

equally. The domain score reflects the 

percentage of points earned out of the 

total possible points for which a 

hospital is eligible. A hospital’s total 

performance score is determined by 

aggregating the scores across all 


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domains. In aggregating the scores 

across domains, the domains could be 

weighted equally or unequally, 

depending on the policy goals. The total 

performance score is then translated 

into the percentage of Hospital VBP 

incentive payment earned using an 

exchange function, which aligns 

payments with desired policy goals. 

4. Proposed FY 2013 Hospital VBP 

Program Scoring Methodology 

We believe that the Performance 

Assessment Model presented and 

analyzed in the 2007 Report to Congress 

provides a useful foundation for 

developing a FY 2013 Hospital VBP 

program performance scoring 

methodology that comports with the 

requirements in section 1886(o) of the 

Act. The Performance Assessment 

Model outlines an approach that we 

believe is well-understood by patient 

advocates, hospitals and other 

stakeholders, was developed during a 

year-long process that involved 

extensive stakeholder input, and was 

presented by us to Congress. Since 

issuing the report, we have conducted 

further, extensive research on a number 

of important methodology issues for the 

Hospital VBP program, including the 

impact of topped-out measures on 

scoring, appropriate case minimum 

thresholds for measures, appropriate 

measure minimum thresholds per 

domain, and other issues required to 

ensure a high level of confidence in the 

scoring methodology (all of which we 

discuss in this proposed rule). After carefully reviewing and 

evaluating a number of potential 

performance scoring methodologies for 

the Hospital VBP program, we propose 

to use a Three-Domain Performance 

Scoring Model, although only two 

domains will receive weight in FY 2013. 

This methodology is very similar to the 

Performance Assessment Model; 

however it incorporates an outcome 

measures domain in addition to the 

clinical process of care and patient 

experience of care domains. While we 

do not propose to adopt any outcome 

measures for the FY 2013 Hospital VBP 

program, we propose to adopt these 

measures as part of an outcome 

measures domain for FY 2014. 

Therefore, we refer to the proposed 

methodology as the Three-Domain 

Performance Scoring Model and 

describe how the outcomes measures 

would apply when the domain is 

eventually given weight. We present below the proposed 

Three-Domain Performance Scoring 

Model, which includes setting 

benchmarks and thresholds, scoring 

hospitals on achievement and 

improvement for three domains (clinical 

process of care, patient experience of 

care, and outcomes), weighting the 

domains, and calculating the hospital 

total performance score. In the 

discussion, we highlight any differences 

between the Three-Domain Performance 

Scoring Model and the Performance 

Assessment Model, along with our 

reasons for the departure. 

a. Clinical Process of Care and Outcome 

Measures Scoring Under the ThreeDomain Performance Scoring Model: 

Setting Performance Benchmarks and 

Thresholds 

As stated above, section 

1886(o)(5)(B)(ii) of the Act requires that 

under the Hospital VBP performance 

scoring methodology, hospital 

performance scores be determined using 

the higher of achievement or 

improvement scores for each measure. 

With respect to scoring hospital 

performance on the proposed clinical 

process of care and outcome measures, 

we propose to use a methodology based 

on the scoring methodology set forth in 

the 2007 Report to Congress 

Performance Assessment Model. Under 

this methodology, a hospital’s 

performance on each quality measure is 

evaluated based on the higher of an 

attainment score (herein, ‘‘achievement 

score’’) in the performance period or an 

improvement score, which is 

determined by comparing the hospital’s 

score in the performance period with its 

score during a baseline period of 

performance. In determining the 

achievement score, we propose that 

hospitals would receive points along an 

achievement range, which is a scale 

between the achievement threshold (the 

minimum level of hospital performance 

required to receive achievement points) 

and the benchmark (the mean of the top 

decile of hospital performance during 

the baseline period). In determining the 

improvement score, we propose that 

hospitals would receive points along an 

improvement range, which is a scale 

between the hospital’s prior score on the 

measure during the baseline period and 

the benchmark. 

Under this methodology, we propose 

to establish the benchmarks and 

achievement thresholds using national 

data from a three-quarter baseline 

period of July 1, 2009 through March 31, 

2010. We discuss our rationale for 

proposing to use this baseline period in 

section D. of this proposed rule. To define a high level of hospital 

performance on a given measure, we 

propose to set the benchmark at the 

mean of the top decile of hospital scores 

on the measure during the baseline 

period. We believe this will ensure that 

the benchmark represents demonstrably 

high but achievable standards of 

excellence; in other words, the 

benchmark will reflect observed scores 

for the group of highest-performing 

hospitals on a given measure. 

We considered several options for 

setting the achievement threshold, 

including the 25th, 50% (median), and 

75th percentile scores. The higher and 

lower options were rejected for being 

too stringent and too lenient, 

respectively. Setting the achievement 

threshold at the 50th percentile, 

however, balances the agency’s goal to 

reward only those hospitals that can 

demonstrate a certain level of quality 

with the desire to set the bar at an 

attainable level. We decided that the 

median score (that is, the point at which 

the performance of the hospital is better 

than the performance of half of all 

hospitals during the baseline period) 

would be an appropriate threshold for 

earning some merit, that is, to earn one 

or more points for achievement. The 

higher the hospital’s achievement falls 

over the achievement performance 

standard, the higher the score, until the 

hospital reaches what we believe to be 

an empirical standard of excellence 

(that is, the benchmark). Therefore, we 

propose to set the achievement 

threshold at the 50th percentile of 

hospital performance on the measure 

during the baseline period. Hospitals 

will have to score at or above this 

threshold to earn achievement points. 

We believe that these proposed 

definitions are in keeping with the 

statutory requirements and reflect the 

evidence-based approach for 

determining thresholds and benchmarks 

set forth in the 2007 Report to Congress. 

b. Clinical Process of Care and Outcome 

Measures Scoring Under the ThreeDomain Performance Scoring Model: 

Scoring Hospital Performance Based on 

Achievement 

Like the Performance Assessment 

Model set forth in the 2007 Report to 

Congress, for each of the proposed 

clinical process and outcome measures 

that apply to the hospital, we propose 

that a hospital would earn 0–10 points 

for achievement based on where its 

performance for the measure fell relative 

to the achievement threshold (which we 

propose above to define as performance 

during the baseline period at the 50th 

percentile) and the benchmark (which 

we propose above to define as 

performance during the baseline period 

at the mean of the top decile), according 

to the following formula: 

[9 * ((Hospital’s performance period 

score¥achievement threshold)/ 

(benchmark¥achievement 

threshold))] + .5, where the hospital 


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performance period score falls in 

the range from the achievement 

threshold to the benchmark 

All achievement points would be 

rounded to the nearest whole number 

(for example, an achievement score of 

4.5 would be rounded to 5). If a 

hospital’s score was: 

• Equal to or greater than the 

benchmark, the hospital would receive 

10 points for achievement 

• Equal to or greater than the 

achievement threshold (but below the 

benchmark), the hospital would receive 

a score of 1–9 based on a linear scale 

established for the achievement range 

(which distributes all points 

proportionately between the 

achievement threshold and the 

benchmark so that the interval in 

performance between the score needed 

to receive a given number of 

achievement points and one additional 

achievement point is the same 

throughout the range of performance 

from the achievement threshold to the 

benchmark). 

• Less than the achievement 

threshold (that is, the lower bound of 

the achievement range), the hospital 

would receive 0 points for achievement. 

c. Clinical Process of Care and Outcome 

Measures Scoring Under the ThreeDomain Performance Scoring Model: 

Scoring Hospital Performance Based on 

Improvement 

In keeping with the approach 

analyzed for the 2007 Report to 

Congress, for the proposed clinical 

process of care and outcome measures, 

we propose that a hospital would earn 

0–9 points based on how much its 

performance on the measure during the 

performance period improved from its 

performance on the measure during the 

baseline period. A unique improvement 

range for each measure would be 

established for each hospital that 

defines the distance between the 

hospital’s baseline period score and the 

national benchmark for the measure (the 

mean of the top decile), according to the 

following formula: 

[10 * ((Hospital performance period 

score¥Hospital baseline period 

score)/(Benchmark¥Hospital 

baseline period score))]¥.5, where 

the hospital performance score falls 

in the range from the hospital’s 

baseline period score to the 

benchmark 

All improvement points would be 

rounded to the nearest whole number. If 

a hospital’s score on the measure during 

the performance period was: 

• Greater than its baseline period 

score but below the benchmark (within 

the improvement range), the hospital 

would receive a score of 0–9 based on 

the linear scale that defines the 

improvement range 

• Equal to or lower than its baseline 

period score on the measure, the 

hospital would receive 0 points for 

improvement. 

d. Examples To Illustrate Clinical 

Process of Care and Outcome Measures 

Scoring Under the Three-Domain 

Performance Scoring Model 

Three examples are presented to 

illustrate how the proposed ThreeDomain Performance Scoring Model 

would be applied in the context of the 

proposed clinical process of care and 

outcome measures. The hospitals were 

selected from an empirical database 

created from 2004–2005 data to support 

the development of the Performance 

Assessment Model, and all performance 

scores are calculated for the pneumonia 

measure, ‘‘patients assessed and given 

pneumococcal vaccine.’’ Figure 1 shows 

the scoring for Hospital B. The 

benchmark calculated for the 

pneumonia measure in this case was 

0.87 (the mean value of the top decile 

in 2004), and the achievement threshold 

was 0.47 (the performance of the 

median or the 50th percentile hospital 

in 2004). Hospital B’s 2005 performance 

rate of 0.91 during the performance 

period for this measure exceeds the 

benchmark, so Hospital B would earn 10 

(the maximum) points for achievement. 

The hospital’s performance rate on a 

measure is expressed as a decimal. In 

the illustration, Hospital B’s 

performance rate of 0.91 means that 91 

percent of applicable patients admitted 

for pneumonia were assessed and given 

the pneumococcal vaccine. (Because 

Hospital B has earned the maximum 

number of points possible for this 

measure, its improvement score would 

be irrelevant.) 


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Figure 2 shows the scoring for another 

hospital, Hospital I. As can be seen 

below, the hospital’s performance on 

this measure went from 0.21 (below the 

achievement threshold) in the baseline 

period to 0.70 (above the achievement 

threshold) in the performance period. 

Applying the achievement scale, 

Hospital I would earn 6 points for this 

measure, calculated as follows: 

[9 * ((0.70 ¥ 0.47)/(0.87 ¥ 0.47))] + 

0.5 = 5.175 + 0.5 = 5.675, rounded to 6 

points. 

However, because Hospital I’s 

performance during the performance 

period is also greater than its 

performance during the baseline period, 

it would be scored based on 

improvement as well. According to the 

improvement scale, based on Hospital 

I’s period-to-period improvement, from 

0.21 to 0.70, Hospital I would earn 7 

points, calculated as follows: 

[10 * ((0.70 ¥ 0.21)/(0.87 ¥ 0.21))] ¥ 

0.5 = 6.92, rounded to 7 points. 

Because the higher of the two scores 

is used for determining the measure 

score, Hospital I would receive 7 points 

for this measure (rounded to the nearest 

whole number). 


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In Figure 3 shown below, Hospital L’s 

performance on the pneumonia measure 

drops from 0.57 to 0.46 (a decline of 

0.11 points). Because this hospital’s 

performance during the performance 

period is lower than the achievement 

threshold of 0.47, it receives 0 points 

based on achievement. It would also 

receive 0 points for improvement, 

because its performance during the 

performance period is lower than its 

performance during the baseline period. 

In this example, Hospital L would 

receive 0 points for the measure. 


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e. Calculation of the Overall Clinical 

Process of Care and Outcome Measure 

Domain Scores Under the Three-Domain 

Performance Scoring Model 

We propose that both a hospital’s 

overall clinical performance score and 

outcome performance score would be 

based on all measures that apply to the 

hospital. We propose that a measure 

applies to a hospital if, during the 

performance period, the hospital treats 

a minimum number of cases (which we 

propose to define as 10 cases in section 

F of this proposed rule) that meet the 

technical specifications for reporting the 

measure. We also propose that at least 

4 measures within a domain must apply 

to the hospital in order for the hospital 

to receive a performance score on that 

domain (this proposal is also discussed 

more fully in section F of this proposed 

rule). Thus, the number and type of 

measures that apply to each hospital 

will vary, depending on the services the 

hospital provides (for example, some 

hospitals may not perform percutaneous 

coronary intervention; therefore, this 

measure would not apply to them). As 

proposed above, for each applicable 

measure, a hospital would receive a 

score based on the higher of its 

achievement and improvement scores. 

Because the clinical process of care and 

outcome measure performance scores 

will be based only on the measures that 

apply to the hospital, we propose to 

normalize the domain scores across 

hospitals by converting the points 

earned for each domain to a percentage 

of total points. 

With respect to the clinical process of 

care and outcome domains, we propose 

that the points earned for each measure 

that applies to the hospital would be 

summed (weighted equally) to 

determine the total earned points for the 

domain: 

Total earned points for domain = Sum 

of points earned for all applicable 

domain measures 

Under the proposed approach, each 

hospital would also have a 

corresponding universe of total possible 

points for each of the clinical process 

and outcome domains calculated as 

follows: 

Total possible points for domain = Total 

number of domain measures that 

apply to the hospital multiplied by 

10 points 

We also propose that the hospital’s 

clinical process of care and outcome 

domain scores would each be a 

percentage, calculated as follows: 

Domain score = Total earned points 

divided by Total possible points 

multiplied by 100% 

As an example, four clinical process 

of care measures apply to Hospital E, 

and Hospital E reports data on at least 

10 cases for each of these measures. 

Under the proposed scoring 

methodology discussed above, Hospital 

E is awarded 9, 5, 3, and 10 points, 

respectively, for these measures. 

Hospital E’s total earned points for the 

clinical process of care measure domain 

would be calculated by adding together 

all the points Hospital E was awarded, 

resulting in a total of 27 points. Hospital 

E’s total possible points would be the 

total number of measures that apply to 

the hospital (four measures) and for 

which the hospital had the minimum 

number of cases multiplied by 10 

points, for a total of 40 points. Hospital 

E’s clinical process of care domain score 

would be the total earned points (that is, 

27 points) divided by the total possible 


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points (that is, 40 points) multiplied by 

100, which yields a result of 67.5. 

5. Scoring Patient Experience of Care 

Measures (HCAHPS) Under the ThreeDomain Performance Scoring Model 

Since the 2007 Report to Congress 

was published, we have performed 

additional analyses on methods of 

scoring HCAHPS measures for purposes 

of the Hospital VBP program using data 

collected from a greater number of 

hospitals and over a longer period of 

time. We have found that the model laid 

out in the 2007 Report to Congress has 

good measurement properties and 

functions as intended with respect to 

achievement, consistency, and 

improvement. We believe that the 

scoring approach proposed here, which 

is based on the HCAHPS model set forth 

in the 2007 Report to Congress, reflects 

both the interrelated nature of HCAHPS 

dimensions and the importance of 

providing incentives to hospitals to 

improve on each of eight dimensions of 

patient experience. 

The scoring approach we propose for 

HCAHPS performance for the FY 2013 

Hospital VBP program captures eight 

HCAHPS dimensions (seven composites 

and one global rating of care) and would 

seek to incentivize hospitals to improve 

on each of the eight dimensions of 

patient experience (See Table 4). We 

propose that the 8 dimensions will be 

structured similar to the 10 HCAHPS 

items that we currently report on 

Hospital Compare, except that we are 

proposing to combine the cleanliness of 

hospital environment and quietness of 

hospital environment items into a single 

dimension and to not include the 

recommend the hospital item. We are 

proposing these changes because we did 

not want to give more weight to the two 

items capturing environmental issues by 

treating them as separate dimensions 

and the ‘‘Recommend the hospital’’ item 

is very similar to the included ‘‘Overall 

rating’’ item. 

We are proposing to score each of the 

eight HCAHPS dimensions using an 

approach that parallels the one we are 

proposing to use to score the clinical 

process measures, using an achievement 

point range from 0–10 and an 

improvement point range from 0–9, 

with the total score on each HCAHPS 

dimension being the higher of the 

achievement or improvement score. In 

order to ensure statistical reliability, we 

are also proposing that, for inclusion in 

the Hospital VBP program for FY 2013, 

hospitals report a minimum of 100 

HCAHPS surveys during the 

performance period (we discuss this 

proposal further in section F of this 

proposed rule). 

In order to be consistent with what we 

do under the Hospital IQR program, we 

are also proposing to give hospitals that 

have 5 or fewer HCAHPS-eligible 

discharges in a month the option to not 

submit HCAHPS surveys for that month 

as part of their quarterly data 

submission. However, in contrast to the 

proposed clinical process of care 

measure scoring methodology, under 

which different numbers of measures 

might apply to different hospitals, all 

hospitals that report HCAHPS data 

would be expected to report the 

complete survey. 

As we are proposing to do with 

respect to scoring the proposed clinical 

process of care measures, we are 

proposing that achievement thresholds 

and benchmarks would be used to score 

hospital performance during the 

performance period, and these 

achievement thresholds and 

benchmarks would be established using 

data from the proposed baseline period. 

Thus, a hospital’s achievement score 

would be based on a fixed standard 

rather than on its current standing 

relative to its peers. The achievement 

threshold for each HCAHPS dimension 

would correspond to median 

performance in the baseline period 

(50th percentile performance). 

Therefore, hospitals would earn points 

for achievement if they performed at 

least as well in the performance period 

as the mid-performing hospital 

performed during the baseline period. 

The benchmark corresponds to excellent 

performance observed in the baseline 

period and we are proposing to set it 

such that the maximum achievement 

points (10 points) would be awarded if 

the hospital performed at least at the 

95th percentile of performance during 

the baseline period. We are proposing to 

set the actual benchmarks and 

achievement thresholds for the FY 2013 

Hospital VBP program using data from 

the proposed baseline period (July 1, 

2009 through March 31, 2010). 

Similar to the proposed clinical 

process measures, we are proposing that 

each of the eight HCAHPS dimensions 

would be given equal weight in 

calculating the overall HCAHPS score. 

However, unlike the proposed scoring 

approach for the proposed clinical 

process of care measures, we are 

proposing to construct the patient 

experience of care measures score for 

the FY 2013 Hospital VBP using three 

elements: Achievement points, 

improvement points, and consistency 

points. 

As shown in Table 4, for each of the 

eight HCAHPS dimensions we propose 

for the FY 2013 Hospital VBP program, 

scores would be based on the publicly 

reported adjusted proportions of best 

category (‘‘top-box’’) responses. (Top-box 

responses, as publicly reported on the 

Hospital Compare website, are the most 

positive responses to HCAHPS survey 

questions.) Please note that the 

‘‘Cleanliness and Quietness’’ dimension 

is the average of the publicly reported 

stand-alone ‘‘Cleanliness’’ and 

‘‘Quietness’’ ratings. 

TABLE 4—EIGHT PROPOSED HCAHPS 

DIMENSIONS FOR THE FY 2013 

HOSPITAL VBP PROGRAM

Dimension (Composite or stand-alone 

item) 

Constituent HCAHPS 

survey items 

1. Nurse communication.Nurse-Courtesy/Respect. 

(% ‘‘Always’’) ............. Nurse-Listen. 

Nurse-Explain. 

2. Doctor communication.Doctor-Courtesy/Respect. 

(% ‘‘Always’’) ............. Doctor-Listen. 

Doctor-Explain. 

3. Cleanliness and 

quietness.

Cleanliness. 

(% ‘‘Always’’) ............. Quietness. 

4. Responsiveness of 

hospital staff.

Bathroom Help. 

(% ‘‘Always’’) ............. Call Button. 

5. Pain management Pain Control. 

(% Always’’) ............... Help with Pain. 

6. Communication 

about medications.

New Medicine-Reason. 

(% ‘‘Always’’) ............. New Medicine-Side 

Effects. 

7. Discharge information.Discharge-Help. 

(% ‘‘Yes’’) .................. Discharge-Systems. 

8. Overall rating ........ Overall Rating. 

a. Patient Experience of Care Measure 

(HCAHPS) Scoring Under the ThreeDomain Performance Scoring Model: 

Scoring Hospitals on Achievement 

Section 1886(o)(3)(A) requires the 

Secretary to establish performance 

standards with respect to the measures 

selected under the Hospital VBP 

program for a performance period for a 

fiscal year. The performance standards 

must include levels of achievement and 

improvement (section 1886(o)(3)(B)). 

The scoring methodology we are 

proposing to implement for HCAHPS 

includes achievement, improvement 

and consistency points. The 

achievement and improvement points 

are very similar to what is proposed for 

clinical measures. The consistency 

points measure whether hospitals are 

meeting the achievement thresholds 

across the eight proposed HCAHPS 

dimensions, which we believe will 

encourage hospitals to meet those 

thresholds for all of them. Consistency 

points are an additional form of 

achievement measurement that 


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complements achievement points 

earned through hospital performance on 

individual HCAHPS dimensions. 

The first proposed component of the 

patient experience of care/HCAHPS 

Hospital VBP program scoring algorithm 

is achievement points, which rewards 

hospital performance at or above the 

proposed baseline median on each of 

the eight HCAHPS dimensions. A 

minimum score of 0 corresponds to all 

eight dimensions being below the 

baseline median (that is, the dimensionspecific achievement threshold), while a 

maximum score of 80 corresponds to all 

eight dimensions being at or greater 

than the 95th percentile from the 

baseline period (that is, the dimensionspecific benchmark). We propose to 

assign 0 to 10 points for each of the 

eight HCAHPS dimensions as follows: 

• If the hospital’s score on a 

dimension is equal to or greater than the 

benchmark (that is, the baseline 95th 

percentile performance), the hospital 

would receive 10 points for 

achievement on that dimension 

• If the hospital’s score on a 

dimension is within the achievement 

range (that is, equal to or greater than 

the achievement threshold of 50th 

percentile performance but below the 

benchmark of 95th percentile 

performance), the hospital would 

receive a score of 1–9, based on a linear 

scale established for the achievement 

range and rounding to the nearest whole 

point according to the following 

formula: 

((Hospital HCAHPS performance period 

dimension score ¥ 50)/5) + 0.5 For 

example, if performance on a given 

dimension is at the 60th percentile, 

the hospital would receive 3 

achievement points, calculated as 

follows: ((60 ¥ 50)/5) + 0.5 = 2 + 

0.5 = 2.5, which would be rounded 

to 3. 

• If the hospital’s score on a 

dimension is less than the achievement 

threshold for the dimension (that is, less 

than the 50th percentile of 

performance), the hospital would 

receive 0 points for achievement. 

b. HCAHPS Performance Scoring Under 

the Three-Domain Performance Scoring 

Model: Scoring Hospitals on 

Improvement 

The second proposed component of 

the HCAHPS Hospital VBP scoring 

algorithm is improvement points. For 

each HCAHPS dimension, a hospital 

could earn from 0–9 improvement 

points for each dimension depending on 

how much its performance on the 

dimension improved from its 

performance on the dimension during 

the baseline period. This proposed 

approach would recognize and 

encourage improvement for each of the 

eight HCAHPS dimensions. A unique 

improvement range for each hospital on 

each HCAHPS dimension would be 

established. Improvement points would 

be awarded proportionately and would 

be rounded to the nearest whole 

number. The score is based on the 

proportion of possible improvement in 

the performance period from the 

baseline period score on a given 

dimension to the benchmark on the 

same dimension, We propose to 

calculate improvement points for each 

of the eight dimensions according to the 

following formula: 

[10*((Hospital performance period score 

¥ Hospital baseline period score)/ 

(Benchmark ¥ Hospital baseline 

period score))] ¥ 0.5, where the 

hospital performance score falls in 

the range from the hospital’s 

baseline period score to the 

benchmark 

All improvement points would be 

rounded to the nearest whole number. If 

a hospital’s score on the measure during 

the performance period was: 

• Greater than its baseline period 

score but below the benchmark (within 

the improvement range), the hospital 

would receive a score of 0–9 based on 

the linear scale that defines the 

improvement range 

• Equal to or lower than its baseline 

period score on the measure, the 

hospital would receive 0 points for 

improvement. 

• If there is no improvement or if the 

score from the baseline period was 

already at the benchmark, the 

improvement score is 0. 

For example, if a hospital’s baseline 

score on a given dimension was at the 

45th percentile and the hospital’s score 

on the dimension during the 

performance period was at the 70th 

percentile, the hospital’s improvement 

points on that dimension would be 5, 

calculated as follows: 

[10 * ((70 ¥ 45)/(95 ¥ 45))] ¥ 0.5 = 4.5, 

which would be rounded to 5. 

c. HCAHPS Performance Scoring 

Model: Calculation of Consistency 

Points 

The third proposed component of the 

HCAHPS Hospital VBP scoring 

algorithm is the consistency score. The 

consistency score recognizes consistent 

achievement across dimensions. To 

ensure at least adequate performance 

across all HCAHPS dimensions, we are 

proposing that for the FY 2013 Hospital 

VBP program hospitals earn consistency 

points ranging from 0–20 based on how 

many of their dimension scores meet or 

exceed the achievement threshold. The 

purpose of the consistency score 

(referred to as the ‘‘minimum 

performance score’’ in the 2007 Report 

to Congress), is to incentivize hospitals 

to continually improve on all HCAHPS 

dimensions to the point where their 

score on each dimension is at or above 

the achievement threshold. We believe 

that providing this type of incentive that 

applies to an entire domain is consistent 

with promoting wider systems changes 

within hospitals to improve quality. 

We are proposing that a hospital 

would receive 0 consistency points if its 

performance on one or more HCAHPS 

dimensions during the performance 

period was at least as poor as the worstperforming hospital’s performance on 

that dimension during the baseline 

period. A hospital would receive a 

maximum score of 20 consistency 

points if its performance on all eight 

HCAHPS dimensions was at or above 

the achievement threshold (50% of 

hospital performance during the 

baseline period). 

We propose for the FY 2013 Hospital 

VBP program that a maximum of 20 

consistency points would be awarded 

proportionately based on the single 

lowest of a hospital’s 8 HCAHPS 

dimension scores during the 

performance period compared to the 

median baseline performance score for 

that specific HCAHPS dimension. If all 

8 of a hospital’s dimension scores 

during the performance period were at 

or above the 50th percentile 

achievement threshold in the baseline 

period, then that hospital would earn all 

20 points. (That is, if the lowest of a 

hospital’s eight HCAHPS dimension 

scores was at or above the 50th 

percentile of hospital performance on 

that dimension during the baseline 

period, then that hospital would earn 

the maximum of 20 consistency points). 

Consistency points would be awarded 

proportionately according to the number 

of percentiles the lowest dimension 

score is between the 0th and 50th 

percentile of hospital performance 

during the baseline period. Consistency 

points would be rounded to the nearest 

whole number (for example, 9.5 

consistency points would be rounded to 

10 points). We propose to define the 

lowest percentile as the lowest 

dimension score among the eight 

HCAHPS dimensions that would be 

scored under the FY 2013 Hospital VBP 

program. The formula for the HCAHPS 

consistency score is as follows: 

(2 * (lowest percentile/5))¥ 0.5, 

rounded to the nearest whole 

number, with a minimum of zero 

and a maximum of 20 consistency 

points 


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For example: 

• If the lowest score a hospital 

receives on an HCAHPS dimension is at 

or below the 0th percentile of hospital 

performance on that dimension during 

the baseline period, then 0 consistency 

points would be awarded to that 

hospital. 

• If the lowest score a hospital 

receives on an HCAHPS dimension is 

equal to the 10th percentile of hospital 

performance on that dimension during 

the baseline period, then 4 (that is, (2 * 

(10/5)) ¥ 0.5 = 3.5, rounded to 4) 

consistency points would be awarded to 

that hospital. 

• If the lowest score a hospital 

receives on a HCAHPS dimension is 

equal to the 25th percentile of hospital 

performance on that dimension during 

the baseline period, then 10 (that is, (2 

* (25/5)) ¥ 0.5 = 9.5, rounded to 10) 

consistency points would be awarded to 

that hospital. 

• If a hospital’s score on all eight 

HCAHPS dimensions were at or above 

the achievement threshold (50th 

percentile of hospital performance 

during the baseline period), then 20 

consistency points would be awarded to 

that hospital. 

d. Examples To Illustrate HCAHPS 

Measure Scoring Model 

Examples are presented here to 

illustrate how the proposed ThreeDomain Performance Scoring Model 

would apply in the context of scoring 

the proposed HCAHPS dimensions. The 

dimension used for this illustration is 

doctor communication. Figure 4 shows 

Hospital B’s scoring on the doctor 

communication dimension. It was 

placed at the 96th percentile, which 

exceeded the benchmark. Thus, 

Hospital B would earn the maximum of 

10 points for achievement. Because this 

is the highest number of achievement 

points the hospital could attain for this 

dimension, its improvement from its 

baseline period score on this measure 

would not be relevant. 

Figure 5 shows that Hospital I’s 

performance on the doctor 

communication dimension rose from 

the 42nd percentile during the baseline 

period to the 64th percentile during the 

performance period. Because Hospital 

I’s performance during the performance 

period exceeds the achievement 

threshold of the 50th percentile, 

Hospital I’s score would be in the 

achievement range. According to the 

achievement scale, Hospital I would 

earn 3 achievement points. However, in 

this case, the hospital’s performance in 

the performance period has improved 

from its performance during the 

baseline period, so Hospital I would be 

scored based on improvement as well as 

achievement. Applying the 

improvement scale, Hospital I’s periodto-period improvement from the 42nd to 

the 64th percentile would earn it 3.65 

improvement points which would be 

rounded to 4 points. Using the greater 

of the two scores, Hospital I would 

receive 4 points for this dimension 

(rounded to the nearest whole number). 


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In Figure 6, Hospital L’s performance 

in the baseline period was at the 11th 

percentile, and its performance declined 

in the performance period to the 6th 

percentile. Because Hospital L’s 

performance during the performance 

period is lower than the achievement 

threshold of the 50th percentile, it 

would receive 0 points based on 

achievement. Hospital L would also 

receive 0 points for improvement 

because its performance during the 

performance period is lower than its 

performance during the baseline period. 


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e. Calculating the Overall Patient 

Experience of Care Domain (HCAHPS) 

Performance Score 

The proposed final step under the 

proposed HCAHPS scoring methodology 

for the FY 2013 Hospital VBP program 

is to combine the three proposed 

component scores into the overall 

patient experience of care domain 

(HCAHPS) performance score. We 

propose to calculate the overall 

HCAHPS performance score as follows: 

1. For each of the eight dimensions, 

determine the larger of the 0–10 

achievement score and the 0–9 

improvement score. 

2. Sum these eight values to arrive at 

a 0–80 HCAHPS base score. 

3. Calculate the 0–20 HCAHPS 

consistency score. 

4. To arrive at the HCAHPS total 

earned points, or HCAHPS overall score, 

sum the HCAHPS base score and the 

consistency score. 

In summary, the overall HCAHPS 

performance score is calculated as 

follows: 

HCAHPS total earned points = HCAHPS 

base score + consistency score. 

6. Weighting of Hospital Performance 

Domains and Calculation of the Hospital 

VBP Total Performance Score 

Section 1886(o)(5)(B)(iii) requires that 

the methodology developed for 

assessing the total performance of each 

hospital must provide for the 

assignment of weights for categories of 

measures as the Secretary determines 

appropriate. As discussed above in 

section C. of this proposed rule, we have 

proposed to group the measures for the 

Hospital VBP program into domains, 

which we would define as categories of 

measures by measure type. For purposes 

of the Hospital VBP program in FY 

2013, we propose that two domains will 

be scored, the clinical process of care 

and patient experience of care. We 

believe that hospital quality is 

multifaceted, requiring adherence to 

evidence-based practices, achieving 

good clinical outcomes, and having 

positive and effectual patient 

experiences. In determining how to 

appropriately weight quality measure 

domains, we considered a number of 

criteria. Specifically, we considered the 

number of measures that we have 

proposed to include in each domain and 

the reliability of individual measure 

data. We also considered the systematic 

effects of alternative weighting schemes 

on hospitals according to their location 

and characteristics (for example, by 

region, size, and teaching status). We 

also considered Departmental quality 

improvement priorities. We strongly 

believe that outcome measures are 

important in assessing the overall 

quality of care provided by hospitals. 

While we believe that the addition of an 

outcome domain will make public 

valuable and important quality 

information regarding hospital 

performance, and bring needed 

attention to patient outcomes, for 

reasons previously discussed in section 

II. C. of this proposed rule, we are not 

proposing to include outcome measures 

in the FY 2013 Hospital VBP program. 

Taking all of these considerations into 

account, we propose the use of a 70 

percent clinical process of care and 30 

percent patient experience of care 

(HCAHPS) weighting scheme for the FY 

2013 Hospital VBP program. We are 

proposing this weighting scheme 

because the 17 proposed clinical 

process of care measures comprise all 

but one of the measures we are 

proposing to include in the FY 2013 

Hospital VBP program. We believe 

assigning a 30 percent weight to the 


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patient experience of care domain is 

appropriate because the HCAHPS 

measure is comprised of eight 

dimensions that address different 

aspects of patient satisfaction. For the 

FY 2014 Hospital VBP program, in 

addition to proposing to use the 30-day 

mortality claims-based measures 

currently displayed on Hospital 

Compare, we propose to adopt the 

following 8 Hospital Acquired 

Condition measures and 9 AHRQ 

Patient Safety Indicator and Inpatient 

Quality Indicator outcome measures: 

Hospital Acquired Condition 

measures: 

• Foreign Object Retained After 

Surgery 

• Air Embolism 

• Blood Incompatibility 

• Pressure Ulcer Stages III & IV 

• Falls and Trauma: (Includes: 

Fracture, Dislocation, Intracranial 

Injury, Crushing Injury, Burn, Electric 

Shock) 

• Vascular Catheter-Associated 

Infections 

• Catheter-Associated Urinary Tract 

Infection (UTI) 

• Manifestations of Poor Glycemic 

Control 

AHRQ Patient Safety Indicators 

(PSIs), Inpatient Quality Indicators 

(IQIs), and Composite Measures: 

• PSI 06—Iatrogenic pneumothorax, 

adult 

• PSI 11—Post Operative Respiratory 

Failure 

• PSI 12—Post Operative PE or DVT 

• PSI 14—Postoperative wound 

dehiscence 

• PSI 15—Accidental puncture or 

laceration 

• IQI 11—Abdominal aortic aneurysm 

(AAA) repair mortality rate (with or 

without volume) 

• IQI 19—Hip fracture mortality rate 

• Complication/patient safety for 

selected indicators (composite) 

• Mortality for selected medical 

conditions (composite) 

We believe that these outcome 

measures provide important information 

relating to treatment outcomes and 

patient safety. All of these measures are 

currently included in the Hospital IQR 

program for the FY 2013 payment 

determination (75 FR 50209). We also 

believe that adding these outcome 

measures would significantly improve 

the correlation between patient 

outcomes and Hospital VBP 

performance. We will propose the FY 

2014 Hospital VBP performance period 

end date and performance standards for 

these outcome measures in future 

rulemaking. We solicit public comment 

on what weight would be appropriate to 

assign to the outcome domain in future 

rulemaking. 

We propose to calculate a hospital’s 

total performance score by multiplying 

its performance on each domain by the 

proposed weight for that domain (70 

percent clinical process of care, 30 

percent patient experience of care), and 

adding those weighted scores together. 

We solicit public comment on the 

proposed domain weighting approach 

and calculation of the total performance 

score, and are particularly interested in 

receiving comments regarding the utility 

and appropriateness of alternative 

methods. 

Earlier in this proposed rule, we 

articulated our principles for valuebased purchasing programs. In order to 

address these principles in our 

proposed hospital value-based 

purchasing program, we considered 

several additional factors when 

developing our proposed performance 

scoring methodology for the Hospital 

Value-Based Purchasing Program. CMS 

is actively seeking all the comments and 

proposals about alternative scoring 

methodologies that may achieve all 

these principles in better, more efficient, 

or more straightforward ways. New, 

innovative ideas are particularly useful 

to the Agency as we seek to create a 

payment system fully aligned with the 

overall health system aims of better 

health, better health care, and more 

efficient care through improvement. 

Section 1886(o)(5)(B)(iv) states that 

the Secretary may not set a minimum 

performance standard in determining 

the hospital performance score for any 

hospital. We note that under the 

proposed Three-Domain Performance 

Scoring Model, the Secretary does not 

set the minimum performance standard 

for any hospital. Rather, the hospital in 

effect sets its own minimum 

performance standard based on how 

well it performed during the baseline 

period, and any improvement from that 

performance is sufficient for the 

hospital to earn improvement points. 

7. Alternative Hospital Performance 

Scoring Models Considered 

Since the 2007 Report to Congress, 

CMS has performed additional research 

and analyses regarding alternative 

scoring approaches for hospital valuebased purchasing. We primarily focused 

on the Three-Domain Performance 

Scoring Model, the Six-Domain 

Performance Scoring Model, and the 

Appropriate Care Model (ACM). We are 

proposing to adopt the Three-Domain 

Performance Scoring Model as 

previously described. 

The Appropriate Care Model (ACM), 

also referred to as the ‘‘all-or-none’’ 

model, is intended to be a more patientcentric method of assessing hospital 

performance on the clinical process of 

care measures. The ACM creates subdomains by topic for the clinical process 

measures and is distinguished from the 

other two models in that it requires 

complete mastery for each topic area 

(‘‘all-or-none’’) in the clinical process of 

care domain at the patient level. 

Under the ACM, the patient 

encounter, rather than the clinical 

process of care measure itself, becomes 

the scored ‘‘event,’’ with a hospital 

receiving 1 point if it successfully 

provides to a patient the applicable 

processes under all of the measures 

within an applicable topic area, or 0 

points if it fails to furnish one or more 

of the applicable processes. The 

hospital’s condition-specific ACM score 

is the proportion of patients with the 

condition who receive the appropriate 

care as captured by the process 

measures that fall within the topic area. 

Within a condition, different sets of 

clinical processes may apply to a 

patient. For example, some AMI 

patients should receive aspirin at arrival 

but other AMI patients should not; some 

AMI patients smoke and should receive 

smoking cessation counseling, while 

others do not smoke and do not need to 

receive such counseling. Regardless of 

the number of clinical process of care 

measures within a topic that apply to a 

patient, each patient encounter to which 

a specific topic area applies weights 

equally with respect to the hospital’s 

score for the topic area. Patients 

requiring many clinical processes 

within a topic are not weighted more 

heavily than patients requiring only a 

few clinical processes. There is no 

‘‘partial credit’’ given to the hospital for 

a patient who is provided some, but not 

all, applicable clinical processes within 

a topic. 

Under the ACM, CMS would 

determine what percentage of a 

hospital’s patients within each 

condition or topic area (for example, 

AMI, HF, PN, and SCIP) received all of 

the applicable processes covered by all 

of the measures that fall under that 

topic. A hospital’s performance on each 

topic area (that is, the percentage of 

patients that received all the appropriate 

processes) would then be scored along 

achievement and improvement ranges 

similar to those we have proposed for 

the Three-Domain Performance Scoring 

Model. These scores across the topic 

areas would then be equally weighted 

and combined to create a score for all 

of the clinical process measures. The 

hospitals would then be measured on 

the outcome and patient experience of 

care domains, just as in the ThreeDomain Performance Scoring Model. 

The total performance score would be 


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computed as a weighted average across 

the three domains, calculated by 

weighting the scores for each of the 

domains. 

With each performance scoring model 

considered, we commissioned 

independent researchers at Brandeis 

University to examine the variation and 

stability of the clinical process of care 

domain under different combinations 

for the number of cases (patients) and 

number of measures and develop 

minimum numbers of cases and 

measures that provide a high level of 

confidence in the meaningfulness of 

performance scores across hospitals 

while at the same time providing scores 

for the largest possible number of 

hospitals. Based on this research, we 

concluded that in order to ensure the 

statistical reliability of a hospital’s score 

under the ACM model, the hospital 

would need to have at least 25 patients 

within a condition (or topic area) to be 

measured on that condition and have 

cases corresponding to at least two 

conditions to receive an overall ACM 

score. 

Under the ACM, for each condition 

measured in the clinical process of care 

domain, a hospital may earn points for 

achievement or for improvement. The 

method for determining earned points 

per condition in the ACM is analogous 

to the way points are determined per 

measure in the proposed Three-Domain 

Performance Scoring Model. 

Accordingly, the points a hospital earns 

for each condition is the higher of its 

points for achievement (that is, 

performance above the achievement 

threshold) or improvement (that is, 

performance better than the hospital’s 

own performance during the baseline 

period). The hospital’s overall ACM 

score for the clinical process of care 

domain is the sum of its conditionspecific points equally weighted across 

all conditions measured for the hospital. 

Applied to the following five 

conditions (AMI, HF, PN, SCIP, and 

HAI), a hospital reporting on all five 

conditions could earn a maximum of 50 

points under the ACM, while a hospital 

reporting only three conditions could 

earn at most 30 points. The final overall 

clinical process of care domain score for 

a hospital under the ACM would be the 

fraction of its actual sum of points 

divided by its maximum possible points 

(for example, 50 in most cases, but 

possibly 30, 20, or 10 corresponding to 

the number of conditions reported). 

The Six-Domain Performance Scoring 

Model, like the ACM, would create and 

separately score individual sub-domains 

at the topic level for the clinical process 

measures. In other words, the clinical 

process of care domain would be further 

broken down into sub-domains 

characterized by condition (our earlier 

analysis of the Six-Domain Performance 

Scoring Model included the HAI 

measures under the SCIP topic area, 

using only the four following topic 

areas, AMI, HF, PN, and SCIP). We 

would assign intermediate scores to 

each hospital for each of the clinical 

process sub-domains (such as, AMI, HF, 

PN, and SCIP). Like the Three-Domain 

Performance Scoring Model, hospitals 

would be scored on each measure in the 

sub-domain and individual measures 

(such as, SCIP–Card–2 and AMI–3) 

would still be weighted equally within 

a sub-domain. Scores across the topic 

area sub-domains would then be equally 

weighted and combined to create an 

overall clinical process score. The total 

performance score would be computed 

as an average across domains, calculated 

by weighting the scores for each of the 

three domains. At least two clinical 

process domains would be needed to 

calculate a total performance score. 

Based on the research conducted at 

Brandeis University discussed above, 

we concluded that a hospital would 

need to report at least 1 measure 

included within a domain (with a 

minimum of 2 domains) and have 10 

opportunities (that is, patients) included 

in the measure. If an outcome domain 

was included, a hospital would also 

need to report on at least one of the 

available outcome measures. 

8. Hospital Performance Scoring Model 

Comparisons 

We assessed each of the models 

discussed above for purposes of 

structuring the performance scoring 

methodology for the Hospital VBP 

program. Specifically, we considered 

the following conceptual and empirical 

criteria: 

• Impact on patients: The primary 

purpose of the Hospital VBP program is 

to drive improvements in clinical 

quality, patient-centered care, and 

efficiency. Thus, consideration of the 

impact of the various models on quality 

improvement in patient care is 

paramount. 

• Accuracy of comparisons made 

between hospitals: The Hospital VBP 

program should make fair comparisons 

between hospitals based on total 

performance scores that are affected 

predominantly or exclusively by the 

hospital’s performance on the 

individual measures. However, 

differences in the TPS between 

hospitals may also be affected by 

differences in the scope of services 

offered, which would determine the mix 

of measures that comprise the TPS for 

each hospital. Thus, a critical aspect of 

developing and implementing the TPS 

is facilitating equivalent and accurate 

comparisons between hospitals. 

• Rank Correlation Impact: In light of 

the fact that the value-based incentive 

payment amount will vary by hospital, 

based on the hospital’s TPS, we must 

consider how each model will affect 

how hospitals rank in terms of their 

performance. 

• Extent of variance across hospitals: 

In addition to accuracy, the second 

important property of a TPS is that it 

has sufficient variance to clearly 

differentiate between hospitals. The 

logic and purpose of the scoring is to 

discriminate among hospitals according 

to relative performance; hence, the TPS 

should capture meaningful variation 

and financial incentives should reflect 

that variation. 

• Number of hospitals that receive a 

score from the Hospital VBP program: 

The models for calculating the total 

performance score use different criteria 

for hospitals’ minimum cases per 

measure and measures per domain. 

Consequently, the number of hospitals 

scored will differ depending on the 

model used. Other things being equal, a 

greater number of hospitals receiving 

scores is preferable in our view. 

We analyzed how each of the scoring 

models discussed above best meet these 

criteria by modeling hospital 

performance on each model using data 

from 2007–2008 for the baseline period 

and 2008–2009 as the performance 

period. As discussed above, the primary 

difference between the Three-Domain 

Performance Scoring Model and the SixDomain Performance Scoring Model is 

that the Six-Domain Performance 

Scoring model creates intermediate 

scores at the topic level for the clinical 

process measures, so that six domains 

are scored (AMI, HF, PN, SCIP, 

outcomes, and patient experience) 

rather than three domains (clinical 

process of care, outcomes, and patient 

experience). The Six-Domain model 

provides an intermediate, conditionspecific score for prevalent and/or highcost conditions in the Medicare 

population that could provide a useful 

summary when a more complete set of 

measures becomes available for those 

conditions. However, in light of the 

current set of measures available for use 

in the Hospital VBP program, we believe 

that the intermediate scores by 

condition would convey a false sense of 

precision about the quality of care for 

that condition. For this reason, and 

because hospital total performance 

scores that we modeled under the SixDomain Performance Scoring Model 

were not substantively different from 

those we modeled under the ThreeVerDate Mar<15>2010 18:43 Jan 12, 2011 Jkt 223001 PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 E:\FR\FM\13JAP2.SGM 13JAP2

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Domain Performance Scoring Model, we 

chose to focus our continued analysis 

on the Three-Domain Performance 

Scoring Model and the ACM. We 

discuss the results of our analysis of the 

Three-Domain Performance Scoring 

Model and the ACM below. 

The scoring of the clinical process of 

care and outcome domains in the ThreeDomain Performance Scoring Model is 

based on the Performance Assessment 

Model presented in the 2007 Report to 

Congress, but includes and scores the 

outcome domain as a separate domain. 

We believe that because each measure is 

scored independently under the ThreeDomain Performance Scoring Model, the 

model will provide useful information 

to hospitals on aspects of care that may 

require improvement. The ThreeDomain Performance Scoring Model 

scores hospitals based on how they 

performed with respect to each 

opportunity to provide appropriate care 

as defined by the measures, in effect 

weighting hospital scores by service and 

patient mix. In contrast with the ACM, 

independent scoring provides 

opportunities for hospitals to receive 

credit for each measure for which they 

meet the performance standard. In 

addition, hospitals are scored on a curve 

at the measure level such that they only 

earn points when their performance on 

a measure is better than their peers’ 

average performance during the baseline 

period, or better than their own 

previous performance, increasing the 

accuracy of comparisons made between 

hospitals. This aspect of the ThreeDomain Performance Scoring Model 

differs from the ACM, because ACM 

scoring results in higher scores for 

hospitals that only report on ‘‘easier’’ 

measures (that is, measures for which 

performance is high for most hospitals), 

not every clinical process of care 

measure for each condition will apply to 

every hospital, and the ACM does not 

award points for hospitals that furnish 

most (but not all) recommended care 

with respect to a clinical process of care 

topic. 

Furthermore, in the Three-Domain 

Performance Scoring Model, the scoring 

of the clinical process of care measures 

in a single clinical process of care 

domain is consistent with the current 

level of precision on the measures. We 

believe that given the current set of 

measures available for adoption into the 

Hospital VBP program at this time, the 

intermediate scores created at the 

condition or topic level under the ACM 

would convey a false sense of precision 

about the quality of care provided for 

that condition. There are efforts in the 

industry to derive sets of measures that 

capture many aspects of quality for a 

certain condition. The measures 

currently in the Hospital IQR program 

were not developed with that aim; 

rather, they were developed and 

implemented as the best single quality 

measures for various conditions treated 

in the hospital and, as such, serve better 

as a proxy for overall quality than as a 

precise accounting of quality for 

individual topics. In other words, the 

measures now available for the Hospital 

VBP program do not represent all of the 

processes that constitute best practices 

for treating the condition in the 

inpatient setting, but collectively 

capture an array of clinical processes 

that are valid indicators representative 

of the overall quality of care provided in 

the hospital inpatient setting. 

We believe that the Three-Domain 

Performance Scoring Model and the 

ACM are similar in several ways. Rank 

correlations of hospitals’ total 

performance scores based on the two 

models were extremely high (between 

89 percent and 94 percent). With respect 

to total performance score rank, most 

hospitals remain in the same quintile 

regardless of which model is used; only 

8 to 18 percent of hospitals changed in 

rank quintile due to model choice. In 

addition, the number of hospitals with 

a sufficient number of cases and 

measures for inclusion under the ACM 

criteria (that is, at least 25 patients in 2 

conditions) is similar to the number of 

hospitals qualifying under the criteria 

that we are proposing below to use for 

the Three-Domain Performance Scoring 

Model (that is, at least 10 patients for 4 

measures). 

The ACM is considered to be ‘‘patient 

focused’’ rather than ‘‘opportunity 

focused.’’ Since the unit of scoring is the 

patient encounter, and the hospital 

earns a clinical process of care domain 

score of zero for a patient if the hospital 

fails to provide any of the applicable 

processes covered by the measures in 

the applicable topic area, we believe 

that the hospital is likely to become 

aware of all of the processes the patient 

requires in order to treat the condition, 

rather than thinking in terms of 

individual opportunities. The ACM sets 

a high bar for quality improvement and 

sends a strong signal about complete 

mastery for each individual topic area 

(‘‘all-or-none’’) at the patient level. On 

the other hand, we believe that for 

complex patients or patients for whom 

one or more processes are not needed, 

the ACM model may provide a 

disincentive to providing quality care. 

Due to its all-or-nothing scoring 

approach, the ACM loses patient 

information that would have some effect 

on the total performance score under the 

Three-Domain Performance Scoring 

Model, under which hospitals would 

receive credit for all of the measures for 

which it met the performance standard. 

Furthermore, as a result of all-ornothing scoring, the ACM approach will 

capture whether a patient received 

appropriate care, but it does not 

describe the extent of lacking care. 

With regard to the extent of variation 

between hospitals, in our analysis, 

hospital performance scores modeled 

under the ACM in general tended to be 

lower than scores modeled under the 

Three-Domain Performance Scoring 

Model. These lower scores would, in 

theory, allow more room for hospitals to 

improve in future years. 

We will continue analyzing 

alternative performance scoring models, 

including the ACM, and may consider 

proposing to implement scoring models 

other than the Three-Domain 

Performance Scoring Model in the 

future. We solicit public comments on 

the proposed Three Domain 

Performance Scoring Model as well as 

other potential performance scoring 

models. 

9. Example of Applying the ThreeDomain Performance Scoring Model to 

a Hospital and Calculating the Total 

Performance Score 

To illustrate the application of the 

proposed Three-Domain Performance 

Scoring Model, we offer the following 

example: 

For the performance period, Hospital 

E reports and receives raw scores on the 

measures as set forth in Table 5. (This 

example uses data from 2007 as the 

baseline period and 2009 as the 

performance period.) 

TABLE 5—EXAMPLES OF HOSPITAL RAW SCORES ON HOSPITAL VBP PERFORMANCE MEASURES

Domain Condition Measure name Achievement 

threshold Benchmark Hospital baseline score 

Hospital performance period score 

Clinical Process of 

Care.

HF–1 .................... Discharge Instructions.0.778 0 .989 0 .4 0 .952 


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TABLE 5—EXAMPLES OF HOSPITAL RAW SCORES ON HOSPITAL VBP PERFORMANCE MEASURES—Continued 

Domain Condition Measure name Achievement 

threshold Benchmark Hospital baseline score 

Hospital performance period score 

HF–2 .................... Evaluation of LVS 

Function.

0.957 1 .0 0 .353 0 .727 

PN–2 .................... Pneumococcal 

Vaccination.

0.844 0 .985 0 .357 0 .583 

PN–7 .................... Initial Antibiotic 

Received Within 

6 Hours of Hospital Arrival.

0.949 1 .0 0 .846 1 .0 

Patient Experience 

of Care.

HCAHPS Base 

Score†.

.............................. ............................ .............................. .............................. 60 

HCAHPS Consistency Score............................... ............................ .............................. .............................. 9 

† The HCAHPS base score is calculated by summing the higher of the achievement or improvement score for each of the 8 HCAHPS 

dimensions. 

Table 6 below depicts the individual 

measure scores and total performance 

score Hospital E would receive after 

applying the proposed scoring 

methodology described above. 

TABLE 6—EXAMPLE OF HOSPITAL VBP SCORE CALCULATION

Domain Condition Achievement 

points 

Improvement 

points 

Earned points 

(higher of 

achievement of 

improvement) 

Domain score 

Clinical Process of Care .......... HF–1 ........................................ 8 9 9 67 .5 

HF–2 ........................................ 0 5 5 

PN–2 ....................................... 0 3 3 

PN–7 ....................................... 10 10 10 

Patient Experience of Care 

(HCAHPS).

HCAHPS Base Score ............. 60 40 †60 69 

HCAHPS Consistency Score .. ............................ ............................ 9 

Total Performance Score .. .................................................. ............................ ............................ ............................ 0 .6795 

† HCAHPS earned points are calculated by summing the higher of achievement or improvement points across the 8 HCAHPS dimensions. 

10. Request for Comments—Proposed 

FY 2013 Hospital Value-Based 

Purchasing Performance Score 

Methodology and Alternatives 

As stated in Sections E(1) and E(2) of 

this proposed rule, we considered both 

statutorily mandated and additional 

factors when assessing the proposed FY 

2013 Hospital Value-Based Purchasing 

program performance score 

methodology and the alternatives 

outlined in the previous sections. These 

additional factors include (1) simplicity 

and transparency of performance score 

methods to hospitals; (2) alignment of 

Hospital VBP performance score 

methodology with other CMS ValueBased Purchasing programs; (3) 

quantitative characteristics of the 

measures and hospital-level data; (4) the 

relative emphasis placed on 

achievement and improvement in a 

performance score methodology; (5) 

elimination of unintended 

consequences for rewarding 

inappropriate hospital behaviors and 

patient outcomes, and (6) use of most 

currently available measure data to 

assess improvement in a performance 

score methodology. 

We solicit comment on the merits and 

drawbacks about all of these factors on 

our proposed performance score 

methodology, and our performance 

score methodology alternatives 

described in this proposed rule. We are 

particularly interested in all suggested 

new, improved scoring methodology 

alternatives that may achieve our 

objectives in better, straightforward, or 

more effective ways. 

F. Applicability of the Value-Based 

Purchasing Program to Hospitals 

Section 1886(o)(1)(C) of the Act 

specifies the applicability of the valuebased purchasing program to hospitals. 

For purposes of the Hospital VBP 

program, the term ‘‘hospital’’ is defined 

under section 1886(o)(1)(C)(i) as a 

‘‘subsection (d) hospital,’’ (as defined in 

section 1886(d)(1)(B) of the Act). 

Section 1886(d)(1)(B) of the Act defines 

a ‘‘subsection (d) hospital’’ as a ‘‘hospital 

located in one of the fifty States or the 

District of Columbia.’’ The term 

therefore does not include hospitals 

located in the territories or hospitals 

located in Puerto Rico. Section 

1886(d)(9)(A) of the Act separately 

defines a ‘‘subsection (d) Puerto Rico 

hospital’’ as a hospital that is located in 

Puerto Rico and that ‘‘would be a 

subsection (d) hospital if it were located 

in one of the 50 states.’’ Therefore, 

because 1886(o)(1)(C) does not refer to 

‘‘subsection (d) Puerto Rico hospitals,’’ 

the Hospital VBP program would not 

apply to hospitals located in Puerto 

Rico. The statutory definition of a 

subsection (d) hospital under section 

1886(d)(1)(B), however, does include 

inpatient, acute care hospitals located in 

the State of Maryland. These hospitals 

are not currently paid under the IPPS in 

accordance with a special waiver 

provided by section 1814(b)(3) of the 

Act. Despite this waiver, the Maryland 

hospitals continue to meet the 

definition of a ‘‘subsection (d) hospital’’ 


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because they are hospitals located in 

one of the 50 states. Therefore we 

propose that the Hospital VBP program 

will apply to acute care hospitals 

located in the State of Maryland unless 

the Secretary exercises discretion 

pursuant to 1886(o)(1)(C)(iv), which 

states that ‘‘the Secretary may exempt 

such hospitals from the application of 

this subsection if the State which is paid 

under such section submits an annual 

report to the Secretary describing how a 

similar program in the State for a 

participating hospital or hospitals 

achieves or surpasses the measured 

results in terms of patient health 

outcomes and cost savings established 

under this subsection.’’ 

The statutory definition of a 

subsection (d) hospital also does not 

apply to hospitals and hospital units 

excluded from the IPPS under section 

1886(d)(1)(B) of the Act, such as 

psychiatric, rehabilitation, long term 

care, children’s, and cancer hospitals. In 

order to identify hospitals, we propose 

that, for purposes of this provision, we 

would adjust payments to hospitals as 

they are distinguished by provider 

number in hospital cost reports. We 

propose that payment adjustments for 

hospitals be calculated based on the 

provider number used for cost reporting 

purposes, which is the CMS 

Certification Number (CCN) of the main 

provider (also referred to as OSCAR 

number). Payments to hospitals are 

made to each provider of record. 

Section 1886(o)(1)(C)(ii) sets forth a 

number of exclusions to the definition 

of the term ‘‘hospital.’’ First, under 

section 1886(o)(1)(C)(ii)(I) a hospital is 

excluded if it is subject to the payment 

reduction under section 

1886(b)(3)(B)(viii)(I) (the Hospital IQR 

program) for the fiscal year. Therefore, 

any hospital that is subject to the 

Hospital IQR payment reduction 

because it does not meet the 

requirements for the Hospital IQR 

program will be excluded from the 

Hospital VBP program for the fiscal 

year. We are concerned about the 

possibility of hospitals deciding to ‘‘opt 

out’’ of the Hospital VBP program by 

choosing to not submit data under the 

Hospital IQR program, thereby avoiding 

both the base operating DRG payment 

reduction and the possibility to receive 

a value-based incentive payment, 

although we recognize that these 

hospitals would still be subject to the 

Hospital IQR program reduction to their 

annual payment increase for the fiscal 

year. We intend to track hospital 

participation in the Hospital IQR 

program and welcome public comment 

on this issue. 

With respect to hospitals for which 

we have measure data from the 

performance period but no measure data 

from the baseline period (perhaps 

because these hospitals were either not 

open during the baseline period or 

otherwise did not participate in the 

Hospital IQR program during that 

period), we are proposing that these 

hospitals will still be included in the 

Hospital VBP program, but that they 

will be scored based only on 

achievement. We invite public 

comments on this approach and 

welcome input on scoring hospitals 

without baseline performance data 

using this and other approaches. 

Under section 1886(o)(1)(C)(ii)(II), a 

hospital is excluded if it has been cited 

by the Secretary for deficiencies during 

the performance period that pose 

immediate jeopardy to the health or 

safety of patients. We are proposing to 

interpret this to mean that any hospital 

that is cited by the Centers for Medicare 

and Medicaid through the Medicare 

State Survey and Certification process 

for deficiencies during the proposed 

performance period (for purposes of the 

FY 2013 Hospital VBP program, July 1, 

2011–March 31, 2012) that pose 

immediate jeopardy to patients will be 

excluded from the Hospital VBP 

program for the fiscal year. We are also 

proposing to use the definition of the 

term ‘‘immediate jeopardy’’ that appears 

in 42 CFR 489.3. 

Section 1886(o)(1)(C)(ii)(III) requires 

the Secretary to exclude for the fiscal 

year hospitals that do not report a 

minimum number (as determined by the 

Secretary) of measures that apply to the 

hospital for the performance period for 

the fiscal year. 

Section 1886(o)(1)(C)(ii)(IV) requires 

the Secretary to exclude for the fiscal 

year hospitals that do not report a 

minimum number (as determined by the 

Secretary) of cases for the measures that 

apply to the hospital for the 

performance period for the fiscal year. 

In determining the minimum number 

of reported measures and cases under 

sections 1886(o)(1)(C)(ii)(III) and (IV), 

the Secretary must conduct an 

independent analysis of what minimum 

numbers would be appropriate. To 

fulfill this requirement, we 

commissioned Brandeis University to 

perform an independent analysis that 

examined technical issues concerning 

the minimum number of cases per 

measure and the minimum number of 

measures per hospital needed to derive 

reliable performance scores. This 

analysis examined hospital performance 

scores using data from 2007–2008 and 

2008–2009. The researchers tested 

different minimum numbers of cases 

and measures and concluded that the 

most important factor in setting 

minimum thresholds for the Hospital 

VBP program is to determine a 

combination of thresholds that allows 

the maximum number of hospitals to be 

scored reliably. We note that such 

reliability depends on the combination 

of the two thresholds. For example, if 

we allowed the number of cases per 

measure to be small (for example, 5 

cases), we might still have reliable 

overall scores if there were a sufficiently 

large number of measures. 

The independent analysis indicated 

that a smaller number of cases would 

yield less reliable results for any given 

measure, ultimately affecting results, 

when the measures were combined to 

create the domain scores. Because the 

proposed Hospital VBP scoring 

methodology aggregates information 

across all of the proposed measures, the 

analysis considered various thresholds 

for the minimum number of cases to 

include in a measure. We recognized 

that lowering the minimum number of 

cases required for each measure would 

allow a greater number of hospitals to 

participate in the Hospital VBP 

program. The analysis explored whether 

a lower threshold for each individual 

measure might be sufficient to make 

composite measures (that is, measures 

based on aggregations of individual 

measures), more statistically reliable. 

Brandeis researchers checked the 

reliability of the total performance score 

for hospitals with only 4 measures. One 

approach was to randomly select 4, 6, 

10, or 14 measures and to compare the 

reliabilities that are determined using 

these different sets of measures per 

hospitals. The research found that using 

4 randomly selected measures per 

hospital did not greatly reduce betweenhospital reliability (particularly in terms 

of rank ordering) from what would have 

been determined using 10 or 14 

measures. Examining hospitals with at 

least 10 cases for each measure, the 

analysis compared the reliability of 

clinical process measure scores for 

hospitals according to the number of 

such measures reported. Whisker plots 

and reliability scores revealed 

comparable levels of variation in the 

process scores for hospitals reporting 

even a small number of measures as 

long as the minimum of 10 cases per 

measure was met. Based on this 

analysis, we propose to establish the 

minimum number of cases required for 

each measure under the proposed Three 

Domain Performance Scoring Model at 

10, which we believe will allow us to 

include more hospitals in the Hospital 

VBP program. 


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When examining the minimum 

number of measures necessary to derive 

reliable performance scores, the 

independent analysis revealed that the 

distribution of performance scores 

varied depending on the number of 

measures reported per hospital. The 

whisker plots and reliability scores 

demonstrated a clear difference in the 

distribution of scores for hospitals 

reporting 4 or more measures compared 

with those reporting fewer than 4 

measures. 

We believe that setting the minimum 

number of measures and cases as low as 

is reasonable is an essential component 

of implementing the Hospital VBP 

program and will help to minimize the 

number of hospitals unable to 

participate due to not having the 

minimum number of cases for a 

measure, or the minimum number of 

measures. Therefore, as we stated above, 

we propose to exclude from hospitals’ 

total performance score calculation any 

measures on which they report fewer 

than 10 cases. We also propose to 

exclude from the Hospital VBP program 

any hospitals to which less than 4 of the 

proposed measures apply. 

We are also proposing that, for 

inclusion in the Hospital VBP program 

for FY 2013, hospitals must report a 

minimum of 100 HCAHPS surveys 

during the performance period. The 

reliability of HCAHPS scores was 

determined through statistical analyses 

conducted by RAND, the statistical 

consultant for HCAHPS. Based on these 

analyses, we believe that a reliability 

rate of 85 percent or higher is desired 

for HCAHPS to ensure that true hospital 

performance, rather than random 

‘‘noise,’’ is measured. RAND’s analysis 

indicates that HCAHPS data do not 

achieve an 85 percent reliability level 

across all eight HCAHPS dimensions 

with a sample of less than 100 

completed surveys. 

As proposed in this section and in 

section II. E. of this proposed rule, 

hospitals reporting insufficient data to 

receive a score on either the clinical 

process of care or HCAHPS domains 

will not receive a total performance 

score for the FY 2013 Hospital VPB 

program. 

We solicit public comments on our 

proposals regarding the minimum 

numbers of cases and measures 

necessary for hospitals’ inclusion in the 

Hospital VBP program. We note that 

hospitals excluded from the Hospital 

VBP program will be exempt from the 

base operating DRG payment reduction 

required under section 1886(o)(7) as 

well as the possibility for value-based 

incentive payments. 

G. The Exchange Function 

Section 1886(o)(6) of the Act governs 

the calculation of value-based incentive 

payments under the Hospital VBP 

program. Specifically, section 

1886(o)(6)(A) requires that in the case of 

a hospital that meets or exceeds the 

performance standards for the 

performance period for a fiscal year, the 

Secretary shall increase the base 

operating DRG payment amount (as 

defined in section 1886(o)(7)(D)), as 

determined after application of a 

payment adjustment described in 

section 1886(o)(7)(B)(i), for a hospital 

for each discharge occurring in the fiscal 

year by the value-based incentive 

payment amount. Section 1886(o)(6)(B) 

defines the value-based incentive 

payment amount for each discharge in 

a fiscal year as the product of (1) the 

base operating DRG payment amount for 

the discharge for the hospital for such 

fiscal year, and (2) the value-based 

incentive payment percentage for the 

hospital for such fiscal year. Section 

1886(o)(6)(C)(i) provides that the 

Secretary must specify a value-based 

incentive payment percentage for each 

hospital for a fiscal year, and section 

1886(o)(6)(C)(ii) provides that in 

specifying the value-based incentive 

payment percentage, the Secretary must 

ensure (1) that the percentage is based 

on the hospital’s performance score, and 

(2) that the total amount of value-based 

incentive payments to all hospitals in a 

fiscal year is equal to the total amount 

available for value-based incentive 

payments for such fiscal year under 

section 1886(o)(7)(A), as specified by 

the Secretary. 

Section 1886(o)(7) of the Act 

describes how the value-based incentive 

payments are to be funded. Under 

section 1886(o)(7)(A), the total amount 

available for value-based incentive 

payments for all hospitals for a fiscal 

year must be equal to the total amount 

of reduced payments for all hospitals 

under section 1886(o)(7)(B), as 

estimated by the Secretary. Section 

1886(o)(7)(B)(i) requires the Secretary to 

adjust the base operating DRG payment 

amount for each hospital for each 

discharge in a fiscal year by an amount 

equal to the applicable percent of the 

base operating DRG payment amount for 

the discharge for the hospital for such 

fiscal year, and further requires that the 

Secretary make these reductions for all 

hospitals in the fiscal year involved, 

regardless of whether or not the hospital 

has been determined to have earned a 

value-based incentive payment for the 

fiscal year. With respect to fiscal year 

2013, the term ‘‘applicable percent’’ is 

defined as 1.0 percent, but the amount 

gradually rises to 2 percent by FY 2017 

(section 1886(o)(7)(C)). 

The 2007 Report to Congress 

introduced the exchange function as the 

means to translate a hospital’s total 

performance score into the percentage of 

the value-based incentive payment 

earned by the hospital. We believe that 

the selection of the exact form and slope 

of the exchange function is of critical 

importance to how the incentive 

payments reward performance and 

encourage hospitals to improve the 

quality of care they provide. 

As illustrated in Figure 7, we 

considered four mathematical exchange 

function options: Straight line (linear); 

concave curve (cube root function); 

convex curve (cube function); and Sshape (logistic function). 


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In determining which of these 

exchange functions would be most 

appropriate for translating a hospitals 

TPS into a value-based incentive 

payment percentage, we carefully 

considered four aspects of each option. 

First, we considered how each option 

would distribute the value-based 

incentive payments among hospitals. 

Under section 1886(o)(7)(A) of the Act, 

the total amount available for valuebased incentive payments for all 

hospitals for a fiscal year must be equal 

to the total amount of reduced payments 

for all hospitals for such fiscal year, as 

estimated by the Secretary. We interpret 

this section to mean that the 

redistribution of a portion of the IPPS 

payment to all hospitals under the 

Hospital VBP program must be 

accomplished in a way that is estimated 

to be budget neutral, without increasing 

or decreasing the aggregate overall IPPS 

payments made to the hospitals. As a 

result, if we award higher value-based 

incentive payments to higher 

performing hospitals, less money is 

available to make value-based incentive 

payments to lower performing hospitals. 

The reverse is also true. If we give 

higher value-based incentive payments 

to lower performing hospitals, less 

money is available to reward higher 

performing hospitals. The form and 

slope of each exchange function also 

affects the level of value-based incentive 

payments available to hospitals at 

various performance levels. Under both 

the cube and logistic functions, lower 

incentive payments are available to 

lower performing hospitals and 

aggressively higher payments are 

available for higher performing 

hospitals. These functions therefore 

distribute more incentive payments to 

higher performing hospitals. Under the 

cube root function, payments stay at 

relatively lower levels for higher 

performing hospitals; this function 

distributes more incentive payments to 

lower performing hospitals. The linear 

function moves more aggressively to 

higher levels for higher performing 

hospitals than the cube root function, 

but not as aggressively as the logistic 

and cube functions. It therefore 

distributes more incentive payments to 

higher performing hospitals than the 

cube root function, but not as 

aggressively as the logistic and cube 

functions. 

Second, we considered the potential 

differences between the value-based 

incentive payment amounts for 

hospitals that do poorly and hospitals 

that do very well. Due to the fact that 

the cube root function distributes lower 

payment amounts to higher performing 

hospitals, the cube root function creates 

the narrowest distribution of incentive 

payments across hospitals. The linear is 

next, followed by the logistic. The cube 


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function, which most aggressively 

moves to higher payment levels for 

higher performing hospitals, creates the 

widest distribution. 

Third, we considered the different 

marginal incentives created by the 

different exchange function shapes. In 

the case of the linear shape, the 

marginal incentive does not vary for 

higher or lower performing hospitals. 

The slope of the linear function is 

constant, so any hospital with a TPS 

that is 0.1 higher than another hospital 

would receive the same increase in its 

value-based incentive payment across 

the entire TPS range. For the other 

shapes, the slope of the exchange 

function creates a higher or lower 

marginal incentive for higher or lower 

performing hospitals. Steeper slopes at 

any given point on the function indicate 

greater marginal incentives for hospitals 

to improve scores and obtain higher 

payments at that point, while flatter 

slopes indicate smaller marginal 

incentives. If the slope is steeper at the 

low end of performance scores than at 

the high end, as with the cube root 

function, hospitals at the low end have 

a higher marginal incentive to improve 

than hospitals at the high end. If the 

slope is steeper at the high end, as with 

the cube function, hospitals have a 

higher marginal incentive to improve at 

the high end than they do at the low 

end. 

Fourth, we weighed the relative 

importance of having the exchange 

function be as simple and 

straightforward as possible. 

Taking all of these factors into 

account, we propose to adopt a linear 

exchange function for the purpose of 

calculating the percentage of the valuebased incentive payment earned by each 

hospital under the Hospital VBP 

program. The linear function is the 

simplest and most straightforward of the 

mathematical exchange functions 

discussed above. The linear function 

provides all hospitals the same marginal 

incentive to continually improve. The 

linear function more aggressively 

rewards higher performing hospitals 

than the cube root function, but not as 

aggressively as the logistic and cube 

functions. We propose the function’s 

intercept at zero, meaning that hospitals 

with scores of zero will not receive any 

incentive payment. Payment for each 

hospital with a score above zero will be 

determined by the slope of the linear 

exchange function, which will be set to 

meet the budget neutrality requirement 

of section 1886(o)(6)(C)(ii)(II) that the 

total amount of value-based incentive 

payments equal the estimated amount 

available under section 1886(o)(7)(A). In 

other words, we will set the slope of the 

linear exchange function for FY 2013 so 

that the estimated aggregate value-based 

incentive payments for FY 2013 are 

equal to 1 percent of the estimated 

aggregate base operating DRG payment 

amounts for FY 2013. Analogous 

estimates will be done for subsequent 

fiscal years. 

We believe that our proposed linear 

exchange function ensures that all 

hospitals have strong incentives to 

continually improve the quality of care 

they provide to their patients. We may 

revisit the issue of the most appropriate 

exchange function in future rulemaking 

as we gain more experience under the 

Hospital VBP program. We solicit public 

comments on our proposed exchange 

function and the resulting distribution 

of value-based incentive payments. 

We note that, in order to evaluate the 

different exchange functions, we needed 

to estimate the value-based incentive 

payment amount. As noted previously, 

section 1886(o)(6)(B) of the Act defines 

the value-based incentive payment 

amount as equal to the product of the 

base operating DRG payment amount for 

each discharge for the hospital for the 

fiscal year and the value-based incentive 

payment percentage specified by the 

Secretary for the hospital for the fiscal 

year. Section 1886(o)(7)(D)(i) defines the 

base operating DRG payment with 

respect to a hospital for a fiscal year as, 

unless certain special rules apply, ‘‘the 

payment amount that would otherwise 

be made under subsection (d) 

(determined without regard to 

subsection (q)) for a discharge if 

[subsection (o)] did not apply; reduced 

by any portion of such payment amount 

that is attributable to payments under 

paragraphs (5)(A), (5)(B), (5)(F) and (12) 

of subsection (d); and such other 

payments under subsection (d) 

determined appropriate by the 

Secretary.’’ Therefore, for estimation 

purposes, to calculate base operating 

DRG payments, we estimated the total 

payments using Medicare Part A claims 

data and subtracted from this number 

the estimates of payments made as 

outlier payments (authorized under 

section 1886(d)(5)(A)), indirect medical 

education payments (authorized under 

section 1886(d)(5)(B)), disproportionate 

share hospital payments (authorized 

under section 1886(d)(5)(F)), and lowvolume hospital adjustment payments 

(authorized under section 1886(d)(12)). 

We note that this approximation of base 

operating DRG payments made for the 

purpose of estimating the value-based 

payment amount to evaluate the 

different exchange functions is not a 

policy proposal. We will propose a 

definition of the term ‘‘base operating 

DRG payment amount’’ under section 

1886(o)(7)(D), as well as how we would 

implement the special rules for certain 

hospitals described in section 

1886(o)(7)(D)(ii), in future rulemaking. 

We invite public comment to inform our 

intended future policymaking on this 

issue. 

Furthermore, section 1886(o)(7)(A) 

states that the total amount available for 

value-based incentive payments for all 

hospitals for a fiscal year shall be equal 

to the total amount of reduced payments 

for all hospitals for such fiscal year. To 

calculate the total amount of reduced 

payments, section 1886(o)(7)(B) states 

that the base operating DRG payment 

amount shall be reduced by an 

applicable percent as defined under 

section 1886(o)(7)(C). This applicable 

percent is 1.0 percent for FY 2013, 1.25 

percent for FY 2014, 1.5 percent for FY 

2015, 1.75 percent for FY 2016, and 2 

percent for FY 2017 and subsequent 

years. To develop an estimation of the 

value-based incentive payment amount 

for the purposes of evaluating the 

different exchange functions, we used 

the FY 2013 1.0 as the applicable 

percent. We multiplied an estimate 

(described above) of the total aggregate 

base operating DRG payments for 

hospitals as defined under 1886(o)(1)(C) 

by 1.0 percent in order to derive the 

total amount available for value-based 

incentive payments that was used in the 

evaluation of the four exchange 

functions. 

H. Proposed Hospital Notification and 

Review Procedures 

Section 1886(o)(8) requires the 

Secretary to inform each hospital of the 

adjustments to payments to the hospital 

for discharges occurring in a fiscal year 

as a result of the calculation of the 

value-based incentive payment amount 

(section 1886(o)(6)) and the reduction of 

the base operating diagnosis-related 

group (DRG) payment amount (section 

1886(o)(7)(B)(i)), not later than 60 days 

prior to the fiscal year involved. We 

propose to notify hospitals of the 1 

percent reduction to their FY 2013 base 

operating DRG payments for each 

discharge in the FY 2013 IPPS rule, 

which will be finalized at least 60 days 

prior to the beginning of the 2013 fiscal 

year. We expect to propose to 

incorporate this reduction into our 

claims processing system in January, 

2013, which will allow the 1 percent 

reduction to be applied to the FY 2013 

discharges, including those that have 

occurred beginning on October 1, 2012. 

We will address the operational aspects 

of the reduction as part of the FY 2013 

IPPS rule. 

Because the proposed performance 

period would end only six months prior 


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to the beginning of FY 2013, CMS will 

not know each hospital’s exact total 

performance score or final value-based 

incentive payment adjustment 60 days 

prior to the start of the 2013 fiscal year 

on October 1, 2012. Therefore, we 

propose to inform each hospital through 

its QualityNet account at least 60 days 

prior to October 1, 2012 of the estimated 

amount of its value-based incentive 

payment for FY 2013 discharges based 

on estimated performance scoring and 

value-based incentive payment 

amounts, which will be derived from 

the most recently available data. We 

also propose that each hospital 

participating in the Hospital VBP 

program establish a QualityNet account 

if it does not already have one for 

purposes of the Hospital IQR program. 

We further propose to notify each 

hospital of the exact amount of its 

value-based incentive payment 

adjustment for FY 2013 discharges on 

November 1, 2012. The value-based 

incentive payment adjustment would be 

incorporated into our claims processing 

system in January 2013, which will 

allow the value-based incentive 

payment adjustment to be applied to the 

FY 2013 discharges, including those 

that have occurred beginning on 

October 1, 2012. 

Section 1886(o)(10)(A)(i) of the Act 

requires the Secretary to make 

information available to the public 

regarding individual hospital 

performance in the Hospital VBP 

program, including: (1) Hospital 

performance on each measure that 

applies to the hospital; (2) the 

performance of the hospital with respect 

to each condition or procedure; and (3) 

the total hospital performance score. To 

meet this requirement, we propose to 

publish hospital scores with respect to 

each measure, each hospital’s conditionspecific score (that is, the performance 

score with respect to each condition or 

procedure, for example, AMI, HF, PN, 

SCIP, HAI), each hospital’s domainspecific score, and each hospital’s total 

performance score on the Hospital 

Compare website. We note that we are 

not proposing to use a hospital’s 

condition-specific score for purposes of 

calculating its total performance score 

under the proposed Three-Domain 

Performance Scoring Model. 

Section 1886(o)(10)(A)(ii) requires the 

Secretary to ensure that each hospital 

has the opportunity to review and 

submit corrections related to the 

information to be made public with 

respect to the hospital under section 

1886(o)(10)(A)(i) prior to such 

information being made public. As 

stated above, we propose to derive the 

Hospital VBP measures data directly 

from measures data submitted by each 

hospital under the Hospital IQR 

program. We propose that the 

procedures we adopt for the Hospital 

IQR program will also be the procedures 

that hospitals must follow in terms of 

reviewing and submitting corrections 

related to the information to be made 

public under section 1886(o)(10). 

With respect to the FY 2013 Hospital 

VBP program, we propose to make each 

hospital’s Hospital VBP performance 

measure score, condition-specific score, 

domain-specific score, and total 

performance score available on the 

hospital’s QualityNet account on 

November 1, 2012. We propose to 

remind each hospital via the hospital’s 

secure QualityNet account of the 

availability of its performance 

information under the Hospital VBP 

program on this date. Pursuant to 

section 1886(o)(10)(A)(ii), we propose to 

provide hospitals with 30 calendar days 

to review and submit corrections related 

to their performance measure scores, 

condition-specific scores, domainspecific scores and total performance 

score. 

Section 1886(o)(10)(B) requires the 

Secretary to periodically post on the 

Hospital Compare website aggregate 

information on the Hospital VBP 

program, including: (1) The number of 

hospitals receiving value-based 

incentive payments under the program 

as well as the range and total amount of 

such value-based incentive payments; 

and (2) the number of hospitals 

receiving less than the maximum valuebased incentive payment available for 

the fiscal year involved and the range 

and amount of such payments. We 

propose to post aggregate Hospital VBP 

information on the Hospital Compare 

website in accordance with Section 

1886(o)(10)(B). We will provide further 

details on reporting aggregated 

information in the future. 

I. Proposed Reconsideration and Appeal 

Procedures 

Section 1886(o)(11)(A) of the Act 

requires the Secretary to establish a 

process by which hospitals may appeal 

the calculation of a hospital’s 

performance assessment with respect to 

the performance standards (section 

1886(o)(3)(A)) and the hospital 

performance score (section 1886(o)(5)). 

Under section 1886(o)(11)(B), there is no 

administrative or judicial review under 

section 1869, section 1878, or otherwise 

of the following: (1) The methodology 

used to determine the amount of the 

value-based incentive payment under 

section 1886(o)(6) and the 

determination of such amount; (2) the 

determination of the amount of funding 

available for the value-based incentive 

payments under section 1886(o)(7)(A) 

and payment reduction under section 

1886(o)(7)(B)(i); (3) the establishment of 

the performance standards under 

section 1886(o)(3) and the performance 

period under section 1886(o)(4); (4) the 

measures specified under section 

1886(b)(3)(B)(viii) and the measures 

selected under section 1886(o)(2); (5) 

the methodology developed under 

section 1886(o)(5) that is used to 

calculate hospital performance scores 

and the calculation of such scores; or (6) 

the validation methodology specified in 

section 1886(b)(3)(B)(viii)(XI). 

We will propose an appeals process 

under section 1886(o)(11) in future 

rulemaking. We invite public comment, 

in general, on the structure and 

procedure of an appropriate appeals 

process. Specifically, CMS seeks 

comment on the appropriateness of a 

process that would establish an agencylevel appeals process under which CMS 

personnel having appropriate expertise 

in the Hospital VBP program would 

decide the appeal. We seek insight on 

what qualifications such personnel 

should hold. Further, we invite 

comment on how the appeals process 

should be structured. Finally, we seek 

public input on the timeframe in which 

these appeals should be resolved. 

J. Proposed FY 2013 Validation 

Requirements for Hospital Value-Based 

Purchasing 

In the FY 2011 IPPS final rule (75 FR 

50227 through 50229), we adopted a 

validation process for the FY 2013 

Hospital IQR program. We propose that 

this validation process will also apply to 

the FY 2013 Hospital VBP program. We 

believe that using this process for both 

the Hospital IQR program and the 

Hospital VBP program is beneficial for 

both hospitals and CMS because no 

additional burden will be placed on 

hospitals to separately return requested 

medical records for the Hospital VBP 

program. Because the measure data we 

are using for the Hospital VBP program 

is the same as the data we collect for the 

Hospital IQR program, we believe that 

we can ensure that the Hospital VBP 

program measure data are accurate 

through the Hospital IQR program 

validation process. 

In future rulemaking related to the 

Hospital IQR program, we will consider 

proposing refinements to our annual 

Hospital IQR validation sample 

selection, targeting, and annual 

validation period for enhanced 

alignment and use in the Hospital VBP 

program. We seek to reduce hospital 

burden and ensure that the information 

we collect for both the Hospital IQR 


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program and the Hospital VBP program 

is accurate. 

K. Additional Information 

1. Monitoring and Evaluation 

As part of our ongoing effort to ensure 

that Medicare beneficiaries receive highquality inpatient care, CMS plans to 

monitor and evaluate the new Hospital 

VBP program. Monitoring will focus on 

whether, following implementation of 

the Hospital VBP program, we observe 

changes in access to and the quality of 

care furnished to beneficiaries, 

especially within vulnerable 

populations. We will also evaluate the 

effects of the new Hospital VBP program 

in areas such as: 

• Access to care for beneficiaries, 

including categories or subgroups of 

beneficiaries. 

• Changes in care practices that might 

adversely impact the quality of care 

furnished to beneficiaries. 

• Patterns of care suggesting 

particular effects of the Hospital VBP 

program (such as whether there are 

changes in the percentage of patients 

receiving appropriate care for 

conditions covered by the measures); or 

a change in the rate of hospital acquired 

conditions. 

• Best practices of high-performing 

hospitals that might be adopted by other 

hospitals. 

We currently collect data on 

readmission rates for beneficiaries 

diagnosed with myocardial infarction, 

heart failure, and pneumonia. We also 

collect chart abstracted data on a variety 

of quality of care indicators related to 

myocardial infarction, heart failure, 

pneumonia, and surgical care 

improvement. These sources and other 

available data will provide the basis for 

early examination of trends in care 

delivery, access, and quality. 

Assessment of the early experience with 

the Hospital VBP program will allow us 

to create an active learning system, 

building the evidence base essential for 

guiding the design of future Hospital 

VBP programs and enabling CMS to 

address any disruptions in access or 

quality that may arise. These ongoing 

monitoring and evaluation efforts will 

be part of CMS’s larger efforts to 

promote improvements in quality and 

efficiency, both within CMS and 

between CMS and hospitals in the 

Hospital VBP program. We welcome 

public comments regarding approaches 

to monitoring and evaluating the 

Hospital VBP program. 

2. Electronic Health Records (EHRs) 

a. Background 

Starting with the FY 2006 IPPS final 

rule, we have encouraged hospitals to 

take steps toward the adoption of EHRs 

(also referred to in previous rulemaking 

documents as electronic medical 

records) that will allow for reporting of 

clinical quality data from the EHRs 

directly to a CMS data repository (70 FR 

47420 through 47421). We encouraged 

hospitals that are implementing, 

upgrading, or developing EHR systems 

to ensure that the technology obtained, 

upgraded, or developed conforms to 

standards adopted by HHS. We 

suggested that hospitals also take due 

care and diligence to ensure that the 

EHR systems accurately capture quality 

data and that, ideally, such systems 

provide point of care decision support 

that promotes optimal levels of clinical 

performance. 

We also continue to work with 

standard setting organizations and other 

entities to explore processes through 

which EHRs could speed the collection 

of data and minimize the resources 

necessary for quality reporting as we 

have done in the past. 

We note that we have initiated work 

directed toward enabling EHR 

submission of quality measures through 

EHR standards development and 

adoption. We have sponsored the 

creation of electronic specifications for 

quality measures for the hospital 

inpatient setting, and will also work 

toward electronically specifying 

measures selected for the Hospital IQR 

program and the Hospital VBP program. 

b. HITECH Act EHR Provisions 

The HITECH Act (Title IV of Division 

B of the ARRA, together with Title XIII 

of Division A of the ARRA) authorizes 

payment incentives under Medicare for 

the adoption and use of certified EHR 

technology beginning in FY 2011. 

Hospitals are eligible for these payment 

incentives if they meet requirements for 

meaningful use of certified EHR 

technology, which include reporting on 

quality measures using certified EHR 

technology. With respect to the 

selection of quality measures for this 

purpose, under section 1886(n)(3)(A)(ii) 

of the Act, as added by section 4102 of 

the HITECH Act, the Secretary shall 

select measures, including clinical 

quality measures, that hospitals must 

provide to CMS in order to be eligible 

for the EHR incentive payments. With 

respect to the clinical quality measures, 

section 1886(n)(3)(B)(i) of the Act 

requires the Secretary to give preference 

to those clinical quality measures that 

have been selected for the Hospital IQR 

program under section 

1886(b)(3)(B)(viii) of the Act or that 

have been endorsed by the entity with 

a contract with the Secretary under 

section 1890(a) of the Act. Any clinical 

quality measures selected for the 

HITECH incentive program for eligible 

hospitals must be proposed for public 

comment prior to their selection, except 

in the case of measures previously 

selected for the Hospital IQR program 

under section 1886(b)(3)(B)(viii) of the 

Act. 

Thus, the Hospital IQR program and 

Hospital VBP Program have important 

areas of overlap and synergy with 

respect to the reporting of quality 

measures under the HITECH Act using 

EHRs. We believe the financial 

incentives under the HITECH Act for 

the adoption and meaningful use of 

certified HER technology by hospitals 

will encourage the adoption and use of 

certified EHRs for the reporting of 

clinical quality measures under the 

Hospital IQR program which are 

subsequently used for the Hospital VBP 

Program. 

We note that the provisions in this 

proposed rule do not implicate or 

implement any HITECH statutory 

provisions. Those provisions are the 

subject of separate rulemaking and 

public comment. 

L. QIO Quality Data Access 

The mission of the Quality 

Improvement Organization (QIO) 

Program, as authorized under section 

1862(g) and Part B of title XI of the Act, 

is to promote the effectiveness, 

efficiency, economy, and quality of 

services delivered to Medicare 

beneficiaries. We contract with one 

organization in each state, as well as the 

District of Columbia, Puerto Rico, and 

the U.S. Virgin Islands, to serve as that 

state/jurisdiction’s QIO. QIOs are 

private, usually not-for-profit 

organizations, which are staffed mostly 

by doctors and other health care 

professionals. These professionals are 

trained to review medical care and help 

beneficiaries with complaints about the 

quality of care and to implement 

improvements in the quality of care 

available throughout the spectrum of 

care. Over time, QIOs have been 

instrumental in advancing national 

efforts that motivate providers to 

improve the quality of Medicare 

services, and in measuring and 

improving outcomes of quality. 

Data collected by QIOs to accomplish 

their mission represent an important 

tool for CMS in our efforts to improve 

quality. QIOs collect survey, 

administrative, and medical records 

data in order to monitor and assess 


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provider performance. The 

confidentiality and disclosure 

requirements associated with QIO 

information are set forth in Section 1160 

of the Act. In particular, this section 

stipulates that QIOs are not Federal 

agencies for purposes of the Freedom of 

Information Act and specifies that ‘‘any 

data or information acquired by [a QIO] 

in the exercise of its duties and 

functions shall be held in confidence 

and shall not be disclosed to any 

person.’’ The section then authorizes 

certain exceptions that allow 

disclosures, including the authority of 

the Secretary to prescribe additional 

exceptions ‘‘in such cases and under 

such circumstances as the Secretary 

shall by regulations provide * * * .’’ 

Implementing regulations governing the 

QIO confidentiality and disclosure 

requirements were issued in 1985 (see 

50 FR 15347, April 17, 1985). In 

accordance with section 1881(c)(8), 

section 1160 and the confidentiality and 

disclosure requirements also apply to 

End Stage Renal Disease Networks. 

A key aspect of these regulations is 

the significant restriction placed on a 

QIO’s ability to disclose QIO 

information, in particular information 

related to a Quality Review Study 

(QRS). A QRS is defined in § 480.101(b) 

as ‘‘an assessment, conducted by or for 

a QIO, of a patient care problem for the 

purpose of improving patient care 

through peer analysis, intervention, 

resolution of the problem and followup.’’ QIOs are instrumental in collecting, 

maintaining, and processing certain data 

associated with the Hospital Inpatient 

Quality Reporting Program. Such data is 

considered to be QRS data. As such, 

these data are subject to the increased 

restrictions placed on disclosures of 

QRS information set forth in § 480.140 

of the QIO regulations. Section 480.140 

even places stringent restrictions on a 

QIO’s ability to disclose to CMS. While 

the QIO regulations have gone largely 

unchanged since 1985, the regulations 

were recently updated to account for 

CMS’ expanded role in quality 

reporting. Specifically, § 480.140 was 

amended to add a new subparagraph (g), 

which ensures that CMS has access to 

QRS information collected as part of the 

Hospital Inpatient Quality Reporting 

Program, following hospital review of 

the data. However, CMS’s access is 

restricted to the sole purpose of 

conducting certain activities related to 

MA organizations, as described in 

§ 422.153. See 75 FR 19678, 19759 

(April 15, 2010). CMS continues to be 

limited in other areas of quality 

reporting based on the current 

regulatory restrictions. 

In fact, many of the same regulatory 

restrictions that impact CMS’ ability to 

properly coordinate quality reporting 

have also impacted CMS’ ability to 

oversee and plan other QIO program 

activities and Departmental initiatives. 

As previously noted, the QIO 

regulations were originally issued in 

1985. Although these regulations have 

not undergone significant change, there 

have been significant changes both 

within and outside the QIO program 

directly impacting the way the QIOs and 

CMS conduct business. In 1985, 

computers were still in their infancy, 

and QIO review activities were 

primarily conducted onsite at the 

provider’s and/or practitioner’s place of 

business. Similarly, CMS’ oversight 

responsibilities were conducted onsite 

at the QIOs’ offices. The QIO program 

regulations were written based on this 

reality. Additionally, the original 

restrictions were designed to enhance 

provider and practitioner participation 

in the QRS process, and in fact, were 

considered necessary to obtain the frank 

and open communication needed to 

improve the quality of health care. 

Since 1985 however, we have seen 

enormous technological advances, 

including improvements in the ability to 

electronically exchange large amounts 

of data safely and securely through the 

internet. Moreover, several laws, most 

notably the Health Insurance Portability 

and Accountability Act (HIPAA) and the 

Federal Information Security and 

Management Act (FISMA), have been 

established to protect sensitive 

information. In addition, despite the 

QIOs continued focus on information 

obtained directly from providers and 

practitioners, QIOs also obtain a large 

amount of CMS claims data 

electronically to complete their review 

activities. During this same time period, 

the QIO program has expanded and now 

includes more emphasis on quality 

reporting and additional 

responsibilities, for example, a broader 

range of beneficiary appeals of provider 

discharges. In turn, CMS’ 

responsibilities have also been 

broadened both in terms of 

programmatic responsibilities, for 

example, quality reporting, and its 

contractor oversight responsibilities. 

Moreover, there are various initiatives 

designed to ensure transparency of our 

programs, as well as the operations of 

individual providers and practitioners. 

We have also identified several 

unintended consequences resulting 

from these regulatory restrictions, which 

need to be addressed to ensure better 

management of the QIOs. This includes 

improvements related to CMS’ oversight 

of QIO physician reviewers. 

In light of the above, we are proposing 

several changes to the QIO regulations. 

We are amending the definition of the 

QIO review system in § 480.101(b) to 

include CMS. The QIO review system 

currently consists of the QIO and the 

organizations and individuals who 

either assist the QIO or are directly 

responsible for providing care or for 

making review determinations with 

respect to that care. Particularly in the 

area of quality reporting, there is a need 

for increased coordination between 

CMS and the QIOs, which includes 

exchanges of data so that CMS can 

better manage and respond to new 

information. 

We are also modifying § 480.130 to 

clarify the Department’s general right to 

access non-QRS confidential 

information. We have made it clear that 

this provision includes Departmental 

components, including CMS as well as 

the Center for Disease Control and 

Prevention including those related to 

data exchanges associated with the 

National Health Care Safety Network. 

Additionally, we are modifying 

§ 480.139(a) to remove limitations on 

CMS’ access to information regarding 

the QIO’s internal deliberations (as 

defined in § 480.101(b). The current 

regulation authorizes CMS’ access to 

information in ‘‘deliberations,’’ but 

limits that access to onsite ‘‘at the QIO 

office or at a subcontracted 

organization.’’ This limitation is 

unrealistic in light of today’s 

technologically advanced business 

environment. 

For the same reasons, we have 

modified § 480.140 to eliminate the 

onsite restriction to CMS’ access to QRS 

data. In addition to the reasoning we 

have presented above, we considered 

this change necessary in order to create 

a more consistent approach to how and 

when we could gain access to QRS 

information. In our recent addition of 

subparagraph (g) to § 480.140, the 

‘‘onsite’’ limitation was removed only in 

the context of MA organizations. We 

now see no reason to confine this 

change to such a narrow purpose. As a 

general matter, CMS must have access to 

QRS information not only for quality 

reporting purposes but also to ensure 

proper oversight and management of the 

QIOs. This includes access for the 

evaluation of specific contractor 

performance issues and for the longterm planning of the QIO program. In 

addition, the current state of technology, 

the use of electronic exchanges of data 

and information, and the speed at which 

data must be exchanged to ensure 

accomplishment of our work, warrants 


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the elimination of the restriction that 

data can only be accessed ‘‘onsite’’ at the 

QIO. We also considered the fact that 

the current ‘‘onsite’’ limitation does not 

establish realistic limits on the use of 

data CMS views onsite. While actual 

copies of materials cannot be removed 

from an onsite location, it is unlikely 

that the ‘‘onsite’’ restriction adequately 

prevents CMS from ‘‘taking away’’ 

information it has learned while 

viewing that information. Thus, the 

change presents a more realistic 

approach to access in light of today’s 

environment. It will enable CMS to 

operate more efficiently, and account for 

the current information exchange 

methodologies used throughout the 

world. In fact, we are asking for 

comments regarding whether the 

‘‘onsite’’ restriction should be eliminated 

entirely from subparagraph (a) of section 

480.140. In order to reflect the specific 

changes we are now proposing in 

section 480.140, we are making 

corresponding changes in § 422.153 to 

ensure consistency between the two 

provisions. 

In general, the changes will not only 

enable CMS to better monitor its 

programs and contractors, but will also 

help to ensure that CMS has access to 

information in a timely manner to 

account for any unintended 

consequences to patient care resulting 

from its programs. This increased access 

to QIO information is vital to achieving 

CMS’ goal of developing a performancebased incentive payment program that 

rewards providers for high-quality care. 

Access to this data will enhance CMS’ 

efforts to create a Hospital VBP program 

based on quality of care. The changes 

will also facilitate CMS’ effort to 

improve coordination with its 

contractors. Moreover, CMS will be 

positioned to better leverage 

opportunities to improve the quality of 

health care and to oversee its contractor 

activities with less cost, including costs 

associated with travel. 

In addition to the proposed changes, 

we are also asking for comments 

regarding the disclosure of QIO 

information to researchers. Historically, 

QIOs have not disclosed confidential 

QIO information to researchers. 

However, we recognize the value that 

research can offer in improving the 

quality of health care, and researchers 

frequently contact QIO program 

representatives to gain access to QIO 

information. Thus, we are requesting 

comments on whether researchers 

should be allowed access to QIO 

information. This includes access to 

confidential information associated with 

quality review studies. Moreover, we are 

requesting comments on the process 

that should be used to evaluate these 

requests, for example, enabling QIOs to 

independently assess such requests or 

using the current CMS Privacy Board 

structure. Insight regarding criteria to be 

used in evaluating these requests should 

also be provided. 

III. Collection of Information 

Requirements 

This document does not impose 

information collection and 

recordkeeping requirements. 

Consequently, it need not be reviewed 

by the Office of Management and 

Budget under the authority of the 

Paperwork Reduction Act of 1995. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Statement 

A. Statement of Need 

The objectives of the Hospital VBP 

program include to transform how 

Medicare pays for care and to encourage 

hospitals to continually improve the 

quality of care they provide. In 

accordance with section 1886(o) of the 

Act, we have proposed to accomplish 

these goals by providing incentive 

payments based on hospital 

performance on quality measures. This 

proposed rule was developed based on 

extensive research we conducted on 

hospital value-based purchasing, some 

of which formed the basis of the 2007 

Report to Congress, as well as extensive 

stakeholder and public input. The 

proposed approach reflects the statutory 

requirements and the intent of Congress 

to promote increased quality of hospital 

care for Medicare beneficiaries by 

aligning a portion of hospital payments 

with performance. 

B. Overall Impact 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995; Pub. L. 104–4), Executive 

Order 13132 on Federalism (August 4, 

1999) and the Congressional Review Act 

(5 U.S.C. 804(2)). 

Executive Order 12866 directs 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). A regulatory impact 

analysis (RIA) must be prepared for 

major rules with economically 

significant effects ($100 million or more 

in any 1 year). To provide funding for 

value-based incentive payments, 

beginning in fiscal year 2013 and in 

each succeeding fiscal year, section 

1886(o)(7) of the Act governs the 

funding for the value-based incentive 

payments and requires the Secretary to 

reduce the base operating DRG payment 

amount for a hospital for each discharge 

in a fiscal year by an amount equal to 

the applicable percent of the base 

operating DRG payment amount for the 

discharge for the hospital for such fiscal 

year. We anticipate defining the term 

‘‘base operating DRG amount’’ in future 

rulemaking. For purposes of this 

proposed rule, we have limited our 

analysis of the economic impacts to the 

value-based incentive payments. As 

required by section 1886(o)(7)(A), total 

reductions for hospitals under section 

1886(o)(7)(B) must be equal to the 

amount available for value-based 

incentive payments under section 

1886(o)(6), resulting in a net budgetneutral impact. Overall, the distributive 

impact of this proposed rule is 

estimated at $850 million for FY 2013. 

Therefore, this proposed rule is 

economically significant and thus a 

major rule under the Congressional 

Review Act. 

The objectives of the Hospital VBP 

program include to transform how 

Medicare pays for care and to encourage 

hospitals to continually improve the 

quality of care they provide. In 

accordance with section 1886(o) of the 

Act, we have proposed to accomplish 

these goals by providing incentive 

payments based on hospital 

performance on quality measures. This 

proposed rule was developed based on 

extensive research we conducted on 

hospital value-based purchasing, some 

of which formed the basis of the 2007 

Report to Congress, as well as extensive 

stakeholder and public input. The 

proposed approach reflects the statutory 

requirements and the intent of Congress 

to promote increased quality of hospital 

care for Medicare beneficiaries by 

aligning a portion of hospital payments 

with performance. 


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The RFA requires agencies to analyze 

options for regulatory relief of small 

businesses. For purposes of the RFA, 

small entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are considered to be small 

entities, either by nonprofit status or by 

having revenues $34.5 million or less in 

any 1 year. Individuals and States are 

not included in the definition of a small 

entity. 

Guidance issued by the Department of 

Health and Human Services interpreting 

the RFA considers effects to be 

economically significant if they reach a 

threshold of 3 to 5 percent or more of 

total revenues or costs. Among the 3,092 

hospitals that would be participating in 

the Hospital VBP program, we estimate 

that percent increases in payments 

resulting from this proposed rule will 

range from 0.0236 percent for the 

lowest-scoring hospital to 1.817 percent 

for the highest-scoring hospital. When 

the reduction in base DRG operating 

payments to hospitals required under 

section 1886(o)(7) is taken into account, 

roughly half of participating hospitals 

will receive a net increase in payments 

and half will receive a net decrease in 

payments. However, we estimate that no 

participating hospital will receive more 

than a net 1 percent increase or decrease 

in payments. This falls well below the 

threshold for economic significance 

established by HHS for requiring a more 

detailed impact assessment under the 

RFA. Thus, we are not preparing an 

analysis under the RFA because the 

Secretary has determined that this 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

an urban area and has fewer than 100 

beds. We are not preparing an analysis 

under section 1102(b) of the Act because 

the Secretary has determined that this 

proposed rule would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2010, that threshold is approximately 

$135 million. This rule would not 

mandate any requirements for State, 

local, or tribal governments, nor would 

it affect private sector costs. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

As stated above, this final rule would 

not have a substantial effect on State 

and local governments. 

C. Anticipated Effects 

Table 7 displays our analysis of the 

distribution of possible total 

performance scores based on 2009 data, 

providing information on the estimated 

impact of this proposed rule. Valuebased incentive payments for the 

estimated 3,092 hospitals participating 

in Hospital VBP are stratified by 

hospital characteristic, including 

geographic region, urban/rural 

designation, capacity (number of beds), 

and percentage of Medicare utilization. 

For example, line 4 of Table 7 shows the 

estimated value-based incentive 

payments for the East South Central 

region, which includes the states of 

Alabama, Kentucky, Mississippi, and 

Tennessee. Column 2 relates that, of the 

3,092 participating hospitals, 301 are 

located in the East South Central region. 

Column 3 provides the estimated mean 

value-based incentive payment to those 

hospitals, which is 1.021 percent. The 

next columns provide the distribution of 

scores by percentile; we see that the 

value-based incentive percentage 

payments for hospitals in the East South 

Central region range from 0.550 at the 

5th percentile to 1.482 at the 95th 

percentile, while the value-based 

incentive payment at the 50th percentile 

is 1.023 percent. 


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TABLE 7—TWO-DOMAIN IMPACT (CLINICAL

PROCESS AND HCAHPS): ESTIMATED INCENTIVE

RATES BY

HOSPITAL

CHARACTERISTIC†

Hospital characteristic N = 3,092 Mean 

Percentile 

5th 10th 25th 50th 75th 90th 95th 

Region: 

New England ............................................................ 138 1 .083 0 .660 0 .751 0 .935 1 .088 1 .276 1 .391 1 .434 Middle Atlantic .......................................................... 370 0 .955 0 .542 0 .619 0 .766 0 .963 1 .152 1 .288 1 .352 South Atlantic ........................................................... 518 1 .041 0 .551 0 .661 0 .822 1 .039 1 .255 1 .420 1 .499 East North Central .................................................... 475 1 .022 0 .555 0 .652 0 .840 1 .025 1 .214 1 .380 1 .472 East South Central ................................................... 301 1 .021 0 .550 0 .634 0 .810 1 .023 1 .235 1 .413 1 .482 West North Central ................................................... 248 1 .083 0 .638 0 .721 0 .866 1 .075 1 .283 1 .470 1 .567 West South Central .................................................. 457 1 .014 0 .477 0 .597 0 .784 0 .997 1 .248 1 .432 1 .563 Mountain ................................................................... 201 0 .980 0 .584 0 .650 0 .822 0 .986 1 .159 1 .336 1 .396 Pacific ....................................................................... 384 0 .935 0 .434 0 .551 0 .755 0 .951 1 .126 1 .290 1 .383 

Urban/Rural: 

Large Urban ............................................................. 1,199 1 .008 0 .552 0 .646 0 .815 1 .014 1 .206 1 .370 1 .449 Other Urban .............................................................. 1,010 1 .016 0 .551 0 .646 0 .817 1 .015 1 .209 1 .379 1 .484 Rural ......................................................................... 883 1 .007 0 .487 0 .607 0 .788 1 .009 1 .239 1 .398 1 .499 

Capacity (by # beds): 

1 to 99 beds ............................................................. 1,045 1 .044 0 .491 0 .617 0 .814 1 .047 1 .284 1 .456 1 .575 100 to 199 beds ....................................................... 939 1 .002 0 .500 0 .598 0 .815 1 .015 1 .201 1 .360 1 .452 200 to 299 beds ....................................................... 481 0 .989 0 .586 0 .662 0 .803 0 .996 1 .175 1 .323 1 .392 300 to 399 beds ....................................................... 279 0 .995 0 .577 0 .668 0 .821 1 .022 1 .167 1 .293 1 .379 400 to 499 beds ....................................................... 151 0 .985 0 .575 0 .700 0 .837 0 .982 1 .135 1 .307 1 .414 500+ beds ................................................................ 197 0 .960 0 .562 0 .652 0 .766 0 .960 1 .146 1 .265 1 .314 

Medicare Utilization: 

0 to 25% ................................................................... 237 0 .990 0 .542 0 .639 0 .798 1 .012 1 .164 1 .352 1 .451 >25% to 50% ............................................................ 1,508 1 .016 0 .528 0 .642 0 .818 1 .020 1 .224 1 .381 1 .459 >50% to 65% ............................................................ 1,148 1 .005 0 .524 0 .637 0 .804 1 .008 1 .206 1 .381 1 .482 > 65% ....................................................................... 196 1 .02 0 .52 0 .60 0 .80 1 .02 1 .28 1 .42 1 .53 

† Note: Because sufficient 2009 data was not available at the time of publication of this proposed rule, the measures SCIP-Card-2 and SCIP-Inf-4 were not included in the calculation of 

estimated incentive rates. However, we believe that no significant change in estimated incentive rates results from the omission of these measures. 


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Table 8 below shows the estimated 

percent distribution by hospital 

characteristic of the 1% reduction ($850 

million) in the base operating DRG 

payment for fiscal year 2013. 

TABLE 8—AVERAGE ESTIMATED PERCENTAGE WITHHOLD AMOUNT (AS

REQUIRED BY SECTION 1886(O)(7) 

OF THE SOCIAL SECURITY ACT) BY

HOSPITAL CHARACTERISTIC

Hospital characteristic N=3,092 

Estimated 

percent 

withhold 

amount 

Region: 

New England ..... 138 5.9 

Middle Atlantic ... 370 15.9 

South Atlantic .... 518 19.5 

East North Central .................. 475 17.5 

East South Central .................. 301 7.8 

West North Central .................. 248 7.2 

West South Central .................. 457 10.3 

Mountain ............ 201 4.8 

Pacific ................ 384 11.2 

Urban/Rural: 

Large Urban ...... 1,199 49.8 

Other Urban ....... 1,010 38.2 

Rural .................. 883 11.1 

Capacity (by # beds): 

1 to 99 beds ...... 1,045 8.1 

100 to 199 beds 939 21.2 

200 to 299 beds 481 20.5 

300 to 399 beds 279 16.9 

400 to 499 beds 151 11.0 

500+ beds .......... 197 23.4 

Medicare Utilization: 

0 to 25% ............ 237 3.9 

>25 to 50% ........ 1,508 60.0 

>50% to 65% ..... 1,148 32.8 

>65% ................. 196 3.2 

We also analyzed the characteristics 

of hospitals not receiving a Hospital 

VBP score based on the program 

requirements, which is shown below in 

Table 9. We estimate that 353 hospitals 

will not receive a Hospital VBP score in 

fiscal year 2013. We note that these 

hospitals will not be impacted by the 

reductions in base DRG operating 

payments under section 1886(o)(7). IPPS 

hospitals not included in this analysis 

were excluded due to the complete 

absence of cases applicable to the 

measures included, or due to the 

absence of a sufficient number of cases 

to reliably assess the measure. 

As might be expected, a significant 

portion of hospitals not receiving a 

Hospital VBP score are small providers 

because such entities are more likely to 

lack the minimum number of cases or 

measures required to participate in the 

Hospital VBP program. We anticipate 

conducting future research on methods 

to include small hospitals in the 

Hospital VBP program. 

TABLE 9—PROJECTED NUMBER OF

HOSPITALS NOT RECEIVING A HOSPITAL VBP SCORE IN FY 2013, BY

HOSPITAL CHARACTERISTIC

Hospital characteristic 

Number of 

hospitals not 

receiving hospital VBP 

Score 

(N=353) 

Region: 

New England ................. 6 

Middle Atlantic ............... 18 

South Atlantic ................ 14 

East North Central ......... 31 

East South Central ........ 26 

West North Central ........ 17 

West South Central ....... 85 

Mountain ........................ 25 

Pacific ............................ 26 

Puerto Rico .................... 34 

Missing Region .............. 71 

Urban/Rural: 

Large Urban .................. 116 

Other Urban ................... 83 

Rural .............................. 83 

Missing Urban/Rural ...... 71 

Capacity (by # beds): 

1 to 99 beds .................. 213 

100 to 199 beds ............ 47 

200 to 299 beds ............ 11 

300 to 399 beds ............ 8 

400 to 499 beds ............ 2 

500+ beds ..................... 0 

Missing Capacity ........... 72 

Medicare Utilization: 

0 to 25% ........................ 78 

>25% to 50% ................. 75 

>50% to 65% ................. 43 

>65% ............................. 28 

Missing Medicare Utilization ......................... 129 

We note that a number of hospitals 

were missing hospital characteristic 

data, including region, urban/rural 

classification, size, and Medicare 

utilization. All 353 hospitals included 

in Table 9, including those with missing 

hospital characteristic data, lacked 

sufficient clinical process of care data or 

HCAHPS data needed to calculate a 

total performance score. 

D. Alternatives considered 

The major alternative performance 

scoring models considered for this 

proposed rule were the Six-Domain 

Performance Scoring Model and the 

Appropriate Care Model, and both of 

these models were discussed in Section 

II. E. of this proposed rule. Examining 

these alternative performance scoring 

models, our analyses showed only 

modest differences in financial 

reimbursements across the separate 

models considered by the various 

characteristics listed above. We believe 

that these observed transfers are within 

the limits of expected variation and do 

not reflect significant differences in 

financial reimbursements between the 

performance scoring models considered. 

E. Accounting Statement 

As required by OMB Circular A–4 

(available at http://www.whitehouse.

gov/omb/circulars/a004/a-4.pdf), we 

have prepared an accounting statement 

showing the classification of the 

impacts associated with the provisions 

of this proposed rule. 

As required by section 1886(o)(7)(A), 

total reductions for hospitals under 

section 1886(o)(7)(B) must be equal to 

the amount available for value-based 

incentive payments under section 

1886(o)(6), resulting in a net budgetneutral impact. Overall, the distributive 

impacts of this proposed rule, resulting 

from the incentive payments and the 

1% reduction (withhold) in the base 

operating DRG payment for fiscal year 

2013, are estimated at $850 million for 

fiscal year 2013 (reflected in 2010 

dollars). 

TABLE 10—ACCOUNTING STATEMENT: 

CLASSIFICATION OF ESTIMATED EXPENDITURES FOR FY 2013 

Category Transfers 

Annualized 

Monetized 

Transfers.

$0 (distributive impacts resulting from the incentive 

payments and the 1% reduction (withhold) in the 

base operating DRG payment are estimated at 

$850 million). 

From Whom 

To Whom? 

Federal Government to Hospitals. 

The analysis above, together with the 

remainder of this preamble, provides a 

Regulatory Impact Analysis. In 

accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

List of Subjects 

42 CFR Part 422 

Administrative practice and 

procedure, Health facilities, Health 


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Federal Register / Vol. 76, No. 9 / Thursday, January 13, 2011 / Proposed Rules 2491 

maintenance organizations (HMO), 

Medicare, Penalties, Privacy, Reporting 

and recordkeeping requirements. 

42 CFR Part 480 

Health care, Health professions, 

Health records, Peer Review 

Organizations (PRO), Penalties, Privacy, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services proposes to amend 

42 CFR chapter IV as follows: 

PART 422—MEDICARE ADVANTAGE 

PROGRAM 

1. The authority citation for part 422 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

Subpart D—Quality Improvement 

2. Section 422.153 is revised to read 

as follows: 

§ 422.153 Use of quality improvement 

organization review information. 

CMS will acquire from quality 

improvement organizations (QIOs) as 

defined in part 475 of this chapter data 

collected under section 

1886(b)(3)(B)(viii) of the Act and subject 

to the requirements in § 480.140(g). 

CMS will acquire this information, as 

needed, and may use it for the following 

functions: 

(a) Enable beneficiaries to compare 

health coverage options and select 

among them. 

(b) Evaluate plan performance. 

(c) Ensure compliance with plan 

requirements under this part. 

(d) Develop payment models. 

(e) Other purposes related to MA 

plans as specified by CMS. 

PART 480—ACQUISITION, 

PROTECTION, AND DISCLOSURE OF 

QUALITY IMPROVEMENT 

ORGANIZATION REVIEW 

INFORMATION 

3. The authority citation for part 480 

continues to read as follows: 

Authority: Secs. 1102 and 1871 of the 

Social Security Act (42 U.S.C. 1302 and 

1395hh). 

Subpart B—Utilization and Quality 

Control Quality Improvement 

Organizations (QIOs) 

4. Section 480.101(b) is amended by 

revising the definition of ‘‘QIO review 

system’’ to read as follows: 

§ 480.101 Scope and definitions. 

* * * * * 

QIO review system means the QIO and 

those organizations and individuals 

who either assist the QIO or are directly 

responsible for providing medical care 

or for making determinations with 

respect to the medical necessity, 

appropriate level and quality of health 

care services that may be reimbursed 

under the Act. The system includes— 

(1) The QIO and its officers, members 

and employees; 

(2) QIO subcontractors; 

(3) Health care institutions and 

practitioners whose services are 

reviewed; 

(4) QIO reviewers and supporting 

staff; 

(5) Data support organizations; and 

(6) CMS. 

* * * * * 

5. Section 483.130 is revised to read 

as follows: 

§ 480.130 Disclosure to the Department. 

Except as limited by § 480.139(a) and 

§ 480.140 of this subpart, QIOs must 

disclose to the Department all 

information requested by the 

Department in the manner and form 

requested. The Information can include 

confidential and non-confidential 

information and requests can include 

those made by any component of the 

Department, such as CMS. 

6. Section 480.139 is amended by 

revising paragraph (a)(1) to read as 

follows: 

§ 480.139 Disclosure of QIO deliberations 

and decisions. 

(a) QIO deliberations. (1) A QIO must 

not disclose its deliberations except to— 

(i) CMS; or 

(ii) The Office of the Inspector 

General, and the General Accounting 

Office as necessary to carry out statutory 

responsibilities. 

* * * * * 

7. Section 480.140 is amended by 

revising paragraph (a)(1) and paragraph 

(g) to read as follows: 

§ 480.140 Disclosure of quality review 

study information. 

(a) * * * 

(1) Representatives of authorized 

licensure, accreditation or certification 

agencies as is required by the agencies 

in carrying out functions which are 

within the jurisdiction of such agencies 

under state law; to federal and state 

agencies responsible for identifying 

risks to the public health when there is 

substantial risk to the public health; or 

to Federal and State fraud and abuse 

enforcement agencies; 

* * * * * 

(g) A QIO must disclose quality 

review study information to CMS with 

identifiers of patients, practitioners or 

institutions— 

(1) For purposes of quality 

improvement. Activities include, but are 

not limited to, data validation, 

measurement, reporting, and evaluation. 

(2) As requested by CMS when CMS 

deems it necessary for purposes of 

overseeing and planning QIO program 

activities. 

Authority: Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program. 

Dated: December 10, 2010. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: December 16, 2010. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2011–454 Filed 1–7–11; 4:15 pm] 

BILLING CODE 4120–01–P 


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