Skip to main content

VUMC testing new payment system for Medicare patients

Mar. 14, 2013, 10:23 AM

Over the next three years, Medicare will test a new payment arrangement that rewards participating hospitals when Medicare patients require fewer inpatient and post-discharge services, but extracts financial penalties when patients require more of these services.
Hospitals can participate in any of 48 illness categories. A hospital’s continued participation hinges on quality of care remaining steady or improving.

Vanderbilt University Medical Center has decided to participate for Medicare patients needing repair or replacement of a heart valve.

“The Heart and Vascular Institute is eager to continue exploring new solutions for lowering the overall cost of care and improving outcomes, and valvular disease represents a good opportunity for Vanderbilt to test the new payment model on a limited basis,” said Robin Steaban, MSN, R.N., VUMC associate chief nursing officer and chief administrative officer at the Vanderbilt Heart and Vascular Institute (VHVI).

VHVI treats approximately 575 valvular heart disease patients per year, including approximately 250 Medicare beneficiaries.

Strictly speaking, it’s not the amount of care that determines whether a hospital is rewarded or penalized, but Medicare’s total cost for care for each patient over a defined period — 30, 60 or 90 days. Hospitals select one of these time periods at the outset and stick with it. VHVI chose the 90-day period for cardiac valve patients.

Under this arrangement hospitals basically compete against their own past performance. In this case, the marker used for determining rewards and penalties is Medicare’s recent 90-day average cost for valvular heart disease patients treated at VUH, minus 2 percent. If Medicare’s cost comes in below that mark, VUMC will receive the difference, and if Medicare’s cost comes in above that mark VUMC must pay Medicare the difference. All providers, including VUH, receive payment as usual from Medicare, and the rewards and penalties are settled between VUMC and Medicare on a periodic basis.

So, Medicare gets a guaranteed 2 percent, 90-day cost savings for heart valve patients treated at VUH, but VUMC gets the opportunity to reap rewards for putting heart valve patients on the road to a more trouble-free post-discharge experience. In principle, hospitals can thrive under the new payment model by improving on things like patient education and coordination with post-acute care providers.

“The idea behind this particular payment model is for hospitals to consider all means for improving continuity of care, thereby reducing the need for readmission and other costly post-acute services. This arrangement plays to our growing strengths in supporting care continuity, so we especially welcome this experiment,” said C. Wright Pinson, MBA, M.D., deputy vice chancellor for Health Affairs and CEO of the Vanderbilt Health System.

According to Steaban, any new measures to improve post-discharge outcomes will be extended to all VUH cardiac valve patients, not just the Medicare beneficiaries. She said the measures might include such things as more follow-up visits and home health visits.

“The exciting part to me is that maybe we can make a difference for these patients by taking this opportunity to deploy resources in new ways,” Steaban said.

VUH Associate Chief of Staff John Morris Jr., M.D., professor of Surgery and Biomedical Informatics, is leading a house-wide initiative to ensure smooth transitions from VUH to each patient’s home or other post-acute care setting. As part of that effort he has established a network of post-acute care providers.

According to Morris, 32 percent of VUH heart valve patients are transferred to a post-acute care facility instead of going straight home.

“This payment model can help us explore how best to work with our network providers, assisting them to recognize and avoid common complications. This is a test case and it’s certain to be followed by many other new opportunities and rewards for supporting excellent patient transitions,” Morris said.

Recent Stories from VUMC News and Communications Publications

Vanderbilt Medicine
VUMC Voice