The Clock is Ticking

November 4, 2015
iVantage Health

Critical Access Hospitals and the Value Equation

by Troy Brown, Client Services Manager

For the last few years, the movement from volume-based payments to payment models tied to value is accelerating. The PPS world has been engaged in Value Based Purchasing (VBP) for the past several years and now we see this model in development for the Critical Access Hospitals (CAHs) as well. With Secretary Burwell’s goal of 90% of Medicare fee-for-service payments being tied to quality and value by 2018, the clock is ticking for the eventuality of CAH participation.

NRHD blog 2bWhen we consider value, it is a perception of quality or outcomes at a certain price. For many CAHs, this can be an adjustment from the traditional cost based reimbursement model currently in place. With cost based reimbursement for services, there has been little incentive for CAHs to focus on efficiency and in some instances, in fact, it can result in a loss in revenue.

The Potential VBP Measures for Rural Providers

CMS has engaged with the National Quality Forum (NQF) to develop a list of rural relevant VBP measures for rural providers. Public comment on the measures have been submitted to CMS for review. Some key points of this program include:

  • Make participation in CMS quality improvement programs mandatory for all rural providers, but allow for a phased approach for full participation
  • Use a core set of measures with a menu of optional measures
  • Ensure that measures are rural relevant and take low volumes into consideration
  • Offer rewards for rural providers based on both achievement and improvement
  • Consider rural-relevant sociodemographic factors in risk adjustment

The expected value-based measures include process of care, safety, outcomes, patient satisfaction and indicators of cost efficiency. For critical access hospitals, the proposed VBP measures for efficiency include:

  • Hip/Knee replacement cost of care
  • Pneumonia episode of care cost of treatment
  • Spend per Medicare beneficiary

The transition to cost efficiency can also be seen in the PPS VBP program with the recent addition of the cost-per-Medicare patient ratio measure. The efficiency measure alone represents 25% of the overall VBP equation for the PPS facilities.

NRHD blog 2When we look at the performance of hospitals through the lens of the Hospital Strength INDEX™, we can see that inpatient cost per case is improving. The average cost per case for Medicare inpatients (case mix and wage adjusted), shows that each provider group is showing improvements in cost per case over FY13 performance.

The CAH median shows the greatest improvement (6% reduction), with PPS and the all US median showing a 3% reduction in cost per case.

How to Prepare

Understanding your cost structure and taking proactive steps to improve quality, outcomes, and satisfaction will be the key to maximizing CAH incentives for VBP in the future. Participation in the Medicare Beneficiary Quality Improvement Project (MBQIP) can certainly help prepare CAHs for reporting, benchmarking and targeted improvement of your quality and satisfaction scores.

But how do you determine your cost per case related to your peers? The iVantage Hospital Strength INDEX™ can help. For an initial high level view of your cost per case, you can request your free INDEX Summary Report from iVantage. In addition to cost benchmarks, the INDEX ranks hospital performance across eight other pillars of performance, providing a holistic view of your hospital’s performance.

To request your INDEX Summary Report, click here.


For more information on MBQIP, visit


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