[Federal Register Volume 76, Number 88 (Friday, May 6, 2011)]
[Rules and Regulations]
[Pages 26490-26547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-10568]



[[Page 26489]]

Vol. 76

Friday,

No. 88

May 6, 2011

Part V





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 422 and 480



 Medicare Program; Hospital Inpatient Value-Based Purchasing Program; 
Final Rule

  Federal Register / Vol. 76, No. 88 / Friday, May 6, 2011 / Rules and 
Regulations  

[[Page 26490]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 422 and 480

[CMS-3239-F]
RIN 0938-AQ55


Medicare Program; Hospital Inpatient Value-Based Purchasing 
Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule implements a Hospital Inpatient Value-Based 
Purchasing program (Hospital VBP program or the program) under section 
1886(o) of the Social Security Act (the 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) (as added by section 3001(a) of the Patient Protection and 
Affordable Care Act, as amended by the Health Care and Education 
Reconciliation Act of 2010 (collectively known as the Affordable Care 
Act)). Scoring in the Hospital VBP program will be based on whether a 
hospital meets or exceeds the performance standards established with 
respect to the measures. By adopting this program, we will reward 
hospitals based on actual quality performance on measures, rather than 
simply reporting data for those measures.

DATES: Effective Date: These regulations are effective on July 1, 2011.

FOR FURTHER INFORMATION CONTACT: Allison Lee, (410) 786-8691.

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 Value-Based Purchasing Program
    E. Provisions of the Affordable Care Act
II. Provisions of the Final Rule and Response to Comments
    A. Overview of the Proposed Rule
    B. Overview of the Hospital Value-Based Purchasing Program
    C. Performance Period
    D. Measures
    E. Performance Standards
    F. Methodology for Calculating the Total Performance Score
    G. Applicability of the Value-Based Purchasing Program to 
Hospitals
    H. The Exchange Function
    I. Hospital Notification and Review Procedures
    J. Reconsideration and Appeal Procedures
    K. FY 2013 Validation Requirements for Hospital Value-Based 
Purchasing
    L. Additional Information
    M. QIO Quality Data Access
III. Collection of Information Requirements
IV. Economic Analyses
    A. Regulatory Impact Analysis
    B. Regulatory Flexibility Act Analysis
    C. Unfunded Mandates Reform Act Analysis
V. Federalism Analysis

Acronyms

    Because of the many terms to which we refer by acronym in this 
final rule, we are listing the acronyms used and their corresponding 
meanings in alphabetical order below:

ACM Appropriate Care Model
AHRQ Agency for Healthcare Research and Quality
AMI Acute Myocardial Infarction
CCN CMS Certification number
CLABSI Central line-associated bloodstream infections
CMMI Center for Medicare and Medicaid Innovation
CMS Centers for Medicare & Medicaid Services
CV Coefficient of variation
DRA Deficit Reduction Act of 2005
DRG Diagnosis-Related Group
EHR Electronic Health Record
EKG Electrocardiogram
FISMA Federal Information Security and Management Act
HAC Hospital acquired conditions
HAI Healthcare-associated infections
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
IQI Inpatient Quality Indicator
IQR Inpatient Quality Reporting
MMA Medicare Prescription Drug, Improvement and Modernization Act of 
2003
NQF National Quality Forum
PMA Patient-mix adjustment
PN Pneumonia
POA Present on Admission
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
SDPS Standard Data Processing System
SES Socioeconomic status
SSI Surgical site infections
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 Reporting program (HOQR), 
formerly known as the Hospital Outpatient Quality Data Reporting 
Program (HOP QDRP), and for physicians and other eligible professionals 
through the Physician Quality Reporting System (formerly referred to as 
the Physician Quality Reporting Initiative or PQRI). We have also 
implemented quality reporting programs for home health agencies and 
skilled nursing facilities based on conditions of participation, and an 
end-stage renal disease quality incentive program that links payment to 
performance.
    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) as the next step

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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 quality 
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 toward 
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 using primarily outcome and patient experience measures.
     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 also seeks to develop a focused core-set of measures 
appropriate to each specific provider category that reflects the level 
of care and the most important areas of service furnished by 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).
     To the extent practicable, measures used by CMS should be 
nationally endorsed by a multi-stakeholder organization. Measures 
should also 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 weighted more 
heavily 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.
    Comment: A number of commenters expressed their general support for 
these principles. One commenter provided additional remarks on the 
principles and made a number of comments on the interactions between 
the principles, including risk adjustment, measure reliability, patient 
experience of care measures, and measure endorsement. For example, this 
commenter expressed agreement with our stated principle that public 
reporting and value-based payment systems should rely on a mix of 
standards, processes, outcome and payment experience measures. In 
supporting this principle, the commenter related that health and health 
care are complex, which requires a multifaceted accountability 
framework. This commenter also supported our statement that scoring 
methodologies should be reliable, as straightforward as possible, and 
stable over time. The commenter further remarked that VBP relies on the 
support of consumers in the marketplace to drive improvement, and that 
consumers must understand the measures and how they are used in order 
to make informed decisions.
    Response: We appreciate the comments and input on these principles, 
and will keep them in mind as we continue to enhance, develop and 
implement the Hospital VBP program, other quality reporting programs, 
and other value-based incentive programs.
    Comment: A number of commenters stated that CMS must ensure that 
value-based purchasing programs foster the development of innovative, 
quality care and provide an adequate level of reimbursement for 
innovative medical technologies. One commenter reiterated that value-
based purchasing programs should not place the provision of lower cost 
services and products in conflict with what is best for the patient.
    Response: We agree that value-based purchasing programs should not 
hinder innovation and should result in improved patient care. We 
believe that the Hospital VBP program will drive improvements in the 
quality of care for Medicare beneficiaries, including the provision of 
innovative technologies, because of its financial incentives for 
providers to provide high-quality, patient-centered care coupled with 
high levels of patient satisfaction. We note that our measure 
development and selection activities take into account national 
priorities, including those established by the National Priorities 
Partnership and the Department of Health and Human Services, as well as 
other widely accepted criteria established in the medical literature. 
We will continue to seek to align all of our quality initiatives to 
promote high-quality care and continued innovation. We intend to 
monitor this program over time for unintended consequences.
    Comment: One commenter requested that CMS extend the 60-day comment 
period.
    Response: We decline to extend the comment period. Based on the 
volume and depth of comments we received in response to the Hospital 
Inpatient VBP proposed rule, we believe that commenters had ample 
opportunity to submit meaningful comments on our proposals and did so. 
Specifically, we received comments discussing a wide range of issues on 
nearly every aspect of that proposed rule, including its potential 
impact on the health care system, the provision of high-quality medical 
care and effects on patient satisfaction. We received comments from a 
wide range of stakeholders, including hospitals, health care providers, 
professional associations, trade groups, advocacy organizations, 
Medicare beneficiaries, private citizens, and others. We have had a 
sufficient opportunity to consider the issues raised by the commenters 
and have taken their comments into account in developing this final 
rule.
    Comment: One commenter stated that ``the specific process for how 
the agency proposes to achieve `transparency' is not described or 
attained,'' and that the proposed rule did not offer sufficient 
information and disclosure of the ``methods and data the agency 
proposes to use'' in developing the Hospital VBP program.
    Response: We disagree. We believe that we have been transparent in 
making public our goals for the Hospital VBP program and numerous 
documents that informed our rulemaking on this program, including the 
2007 Report to Congress, Congressional testimony and public listening 
session transcripts. We also believe that the proposed rule contains 
detailed information regarding the data and analyses we considered in 
developing our proposals.
    However, because we seek to ensure that the continued development 
of the Hospital VBP program take place in as transparent a manner as 
possible, we will make available additional information regarding our 
analyses, study results, and methods and will inform the public 
accordingly.
    We have addressed specific issues relating to the use of measures, 
scoring

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methodology, and other aspects of the Hospital VBP program below.

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 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 applicable 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 2005 
IPPS final rule (69 FR 49078) and codified the applicable percentage 
increase change in Sec.  412.64(d) of our regulations. We adopted 
additional requirements for 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 Applicable 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 
amount for hospital inpatient operating costs by adding a 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, 
provided in part that the applicable 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 applicable 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 Sec.  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 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 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 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 before the effective 
date of the change 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, as amended by section 
3001(a)(2)(C) of the Affordable Care Act, requires that the Secretary 
establish procedures for making information regarding measures 
submitted under the Hospital IQR program available to the public after 
ensuring a hospital has the opportunity to review its data. To meet 
this requirement, we display most Hospital IQR program data on the 
Hospital Compare Web site, 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

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furnish. The Hospital Compare Web site currently makes public 
information on a wide range of measures, including 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 e-mail 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 
Value-Based Purchasing Program

    Section 5001(b) of the DRA required the Secretary to develop a plan 
to implement a value-based purchasing 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 
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.
    On November 21, 2007, we submitted the Report to Congress: Plan to 
Implement a Medicare Hospital Value-Based Purchasing Program, which is 
available on the CMS Web site. The report discusses options for a plan 
to implement a Medicare hospital value-based purchasing 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 value-based purchasing 
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 
DRG payment contingent on performance. We analyzed criteria for 
selecting performance measures and considered a potential phased 
approach to transition from Hospital IQR to value-based 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 Affordable Care Act added a new section 
1886(o) to the Act, which requires the Secretary to establish a 
hospital value-based 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 1.0 percent, 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 Final Rule and Response to Comments

A. Overview of the January 7, 2011 Hospital Inpatient VBP Program 
Proposed Rule

    On January 7, 2011, we issued a proposed rule that proposes to 
implement a Hospital VBP program under section 1886(o) of the Act (76 
FR 2454, January 13, 2011). Specifically, we proposed 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 measures would be clinical process of 
care measures, which we would group into a clinical process of care 
domain, and 1 measure would be the HCAHPS survey, which would fall 
under a patient experience of care domain. With respect to the clinical 
process of care and HCAHPS measures, we proposed to use a three-quarter 
performance period from July 1, 2011 through March 31, 2012 for the FY 
2013 Hospital VBP payment determination. We proposed to determine 
whether hospitals meet the performance standards for the selected 
measures by comparing their performance during the performance period 
to their performance during a three-quarter baseline period of July 1, 
2009 through March 31, 2010. We also proposed to initially adopt for 
the FY 2014 Hospital VBP program three outcome measures. With respect 
to the outcome measures, we proposed to use an 18-month performance 
period from July 1, 2011 to December 31, 2012. Furthermore, for these 
outcome measures, we proposed to establish performance standards and to 
determine whether hospitals meet those standards by comparing their 
performance during the performance period to their performance during a 
baseline period of July 1, 2008 to December 31, 2009.
    We also proposed to adopt 8 Hospital Acquired Condition measures 
and 9 AHRQ Patient Safety Indicator and Inpatient Quality Indicator 
outcome measures. We further proposed to begin the performance period 
for each of these proposed measures 1 year after we included the 
measure on the Hospital Compare Web site.
    In general, we proposed to implement a methodology for assessing 
the total performance of each hospital based on performance standards, 
under which we would score each hospital based on achievement and 
improvement ranges for each applicable measure. Additionally, we 
proposed to calculate a total performance score for each hospital by 
combining the greater of the

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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 proposed to convert each hospital's Total Performance 
Score into a value-based incentive payment utilizing a linear exchange 
function.
    We provided a 60-day public comment period in which we received 
approximately 319 timely comments from hospitals, health care 
facilities, advocacy organizations, researchers, patients, and other 
individuals and organizations. Summaries of the public comments, as 
well as our responses to those comments, are set forth below.
    Comment: A number of commenters requested clarification on the 
interaction between the Hospital IQR program and the Hospital VBP 
program. Commenters specifically requested that we explain more fully 
how the penalties under the two programs will interact, as well as 
clarify if we intend to continue the Hospital IQR program in the 
future.
    Response: The Affordable Care Act did not repeal section 
1886(b)(3)(B)(viii), the statutory authority for the Hospital IQR 
program, and that program will continue to exist side-by-side with the 
Hospital VBP program. However, we note that beginning in FY 2015, the 
reduction to the applicable percentage increase under the Hospital IQR 
program changes from a straight 2.0 percentage point reduction to a 
reduction equal to ``one quarter of such applicable percentage 
increase'' (determined without regard to several other applicable 
statutory reductions).
    We also note that under section 1886(o)(1)(C)(I), hospitals that 
are subject to the Hospital IQR program payment reduction for a fiscal 
year are excluded from the definition of ``hospital'' for purposes of 
the Hospital VBP program for that fiscal year. We interpret this 
provision to mean that a hospital that does not meet the requirements 
of the Hospital IQR program with respect to a fiscal year and, as a 
result, will receive a reduction to the applicable percentage increase 
for that fiscal year, will not be subject to the reduction to its base 
operating DRG payment amount under the Hospital VBP program for that 
fiscal year or be eligible to receive a value-based incentive payment 
for that fiscal year.
    Comment: Some commenters requested that CMS delay implementation of 
the Hospital VBP program. A number of commenters urged CMS to adopt the 
implementation calendar discussed in 2007 Report to Congress, in which 
the first performance period would begin April 1, 2013.
    Response: We are statutorily required to begin making value-based 
incentive payments under the Hospital VBP program to hospitals for 
discharges occurring on or after October 1, 2012 under section 
1886(o)(1)(B) of the Act. Thus, the first performance period must begin 
before April 1, 2013, which is the time suggested by the commenters. As 
we stated in the proposed rule, in determining what performance period 
to propose to adopt, we were cognizant that hospitals submit data on 
the chart abstracted measures adopted for the Hospital IQR Program on a 
quarterly basis, and for that reason, we believed that the performance 
period should commence at the beginning of a quarter. We also 
recognized that we needed to balance the length of the performance 
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 proposed July 1, 2011 
as the start of the performance period.
    Comment: Some commenters requested additional information on how we 
will educate consumers about the Hospital VBP program.
    Response: We understand how crucial it is to communicate clearly 
and consistently with all stakeholders in order to provide accurate and 
timely information about the Hospital VBP program. We believe that 
communicating in a way that promotes transparency and understanding of 
the Hospital VBP program will help reduce confusion and 
misunderstanding while enhancing the program's success.
    To this end, we will be undertaking an extensive outreach and 
education campaign to ensure that all stakeholders understand how the 
Hospital VBP program works. In addition to providing information on 
www.cms.gov and www.medicare.gov, as well as through other existing 
mechanisms that we use to communicate with the public such as 
newsletters, e-mail blasts, listserv communications, special forums, 
and webinars, an important element of this campaign will be a new 
Hospital VBP page on http://www.cms.gov. In addition, as required under 
sections 1886(o)(10)(A) and (B), hospital specific and aggregate 
information for the Hospital VBP program will be made available on the 
Hospital Compare Web site.
    Comment: One commenter stated that the Hospital VBP program 
statutory authority overlaps with other provisions of the Affordable 
Care Act and asked CMS to address the various incentives created by the 
Affordable Care Act, how it intends to differentiate among separate 
policies, and how it will ensure that incentives will not overlap or be 
duplicative. The commenter specifically cited efforts to increase 
productivity and efficiency through Accountable Care Organizations, 
market basket reductions for productivity, penalties related to 
hospital-acquired conditions, and payment reductions for readmissions.
    Response: While there may be specific areas of overlap addressed by 
the various statutory provisions and policies, the legislative 
requirements, programs, and policies cited by the commenter represent 
interrelated but distinct areas of efforts to improve quality in the 
Medicare program. We will continue to monitor the interactions between 
the policies cited by the commenter and will continue discussions with 
stakeholders on this topic.
    Comment: One commenter stated that all purchaser/payer value-based 
strategies and programs should be supported and encouraged through the 
Center for Medicare and Medicaid Innovation (CMMI).
    Response: Created by the Affordable Care Act and launched on 
November 16, 2010, the CMMI will examine new ways of delivering health 
care and paying health care providers that can save money for Medicare 
and Medicaid while improving the quality of care. CMMI will consult a 
diverse group of stakeholders including hospitals, doctors, consumers, 
payers, States, employers, advocates, relevant federal agencies and 
others to obtain direct input and build partnerships for its upcoming 
work. We agree that CMMI is an important contributor in developing 
innovative strategies for value-based purchasing programs, and look 
forward to continuing to leverage the Center's resources and expertise 
in future years of the Hospital VBP program.
    Comment: One commenter suggested that we establish a ``Pay to 
Share'' pool under which funding would be provided to enable higher-
rated hospitals to instruct lower-rated hospitals on best practices.
    Response: While we appreciate the comment, we do not believe we 
have the statutory authority under the Act to implement such a program 
at this time.

C. 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

[[Page 26495]]

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 chart-abstracted measures 
adopted for the Hospital IQR program on a quarterly basis, and for that 
reason, we proposed that the performance period commence at the 
beginning of a quarter. We also recognized that we must balance the 
length of the period for collecting measure data with the need to 
undertake the rulemaking process in order to propose a 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.
    Therefore, we proposed to use the fourth quarter of FY 2011 (July 
1, 2011 through September 30, 2011) and the first and second quarters 
of FY 2012 (October 1, 2011 through March 31, 2012) as the performance 
period for the clinical process of care and HCAHPS measures we proposed 
to initially adopt for the FY 2013 Hospital VBP program. Under the 
proposed approach, hospitals would be scored based on how well they 
perform on the clinical process of care and patient experience measures 
during this performance period. 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 proposed to adopt for the FY 2014 Hospital VBP program payment 
determination, we proposed to establish a performance period of July 1, 
2011 to December 31, 2012. We also proposed to begin the performance 
period for the 8 proposed HAC measures and 9 proposed AHRQ Patient 
Safety Indicator (PSI) and Inpatient Quality Indicator (IQI) outcome 
measures 1 year after those measures were included on the Hospital 
Compare Web site. The proposed HAC and AHRQ measures were included on 
Hospital Compare on March 3, 2011.
    Comment: A number of commenters requested that we adopt a 12-month 
performance period for the proposed mortality measures rather than the 
proposed 18-month performance period. Some were concerned that seasonal 
fluctuations in mortality rates would impact the measure rates if an 
18-month performance period were used instead of a 12-month period.
    Response: We proposed to use an 18-month performance period (July 
1, 2011 through December 31, 2012) for the three proposed mortality 
measures in order to be able to increase the reliability of the measure 
rates by including more cases. However, in response to the commenters' 
concern about how the use of a period that is not equal to a year (or 
multiple years) could introduce seasonal fluctuations into the measure 
rates, we conducted additional reliability analyses on the hospital-
level risk standardized mortality rates for the proposed 30-day 
mortality measures using 12 months, 18 months, and 24 months, and have 
concluded that 12 months of data provides moderate to high reliability 
for the Heart Failure and Pneumonia 30-day mortality measures, and is 
sufficiently reliable for the AMI 30-day mortality measure. Therefore, 
we are finalizing a 12-month performance period of July 1, 2011 to June 
30, 2012 for the three proposed 30-day mortality measures for the FY 
2014 Hospital VBP payment determination.
    Comment: Some commenters expressed concern about the proposed 
baseline period for the FY 2014 mortality outcome measures. Commenters 
noted that the proposed 18-month baseline period would lead to data 
overlap during each program year.
    Response: For the reasons noted above, we are finalizing a 12-month 
performance period of July 1, 2011 to June 30, 2012 for the three 
proposed 30-day mortality measures for the FY 2014 Hospital VBP payment 
determination. In accordance with our proposal that hospital 
performance should be evaluated based on how well hospitals performed 
during the same quarters in a baseline period, we are finalizing a 12-
month baseline period for the mortality outcomes measures' performance 
standards calculations from July 1, 2009 to June 30, 2010. We believe 
that this change will address commenters' concerns about seasonal 
fluctuations in the data or overlap between program years.
    Comment: Some comments requested that we require 2-3 years' worth 
of data for outcome measures to ensure that the measures do not result 
in any unintended consequences.
    Response: As noted above, our reliability analyses for the proposed 
30-day mortality measures indicate that using 12-months of data yields 
sufficient reliability (moderate to high) for the HF, PN and AMI 30-day 
mortality measures. We believe this time frame will enable us to 
calculate the measures using reliable data. CMS will monitor this 
policy to ensure that negative consequences do not occur as a result of 
the shortened performance period and, if indicated, would consider 
proposing to lengthen the performance period for future program years.
    Comment: Many commenters generally supported our performance period 
proposals given the statutory deadlines.
    Response: We thank commenters for their support.
    Comment: Some commenters suggested that we use 12-month performance 
periods for all measures as soon as possible.
    Response: We anticipate proposing to use a full year as the 
performance period for all measures in the future.
    After considering the public comments, we are finalizing a 
performance period of July 1, 2011 through March 31, 2012 that will 
apply to the clinical process of care and patient experience measures 
for the FY 2013 Hospital VBP program. With respect to the FY 2014 
Hospital VBP program, we are finalizing a 12-month performance period 
of July 1, 2011 through June 30, 2012 that will apply to the three 30-
day mortality measures (AMI, HF, PN) that we are finalizing below. We 
are also finalizing our proposal to adopt a performance period that 
begins 1 year after any HAC and/or AHRQ measures that are specified for 
the Hospital IQR program are included on Hospital Compare, and in 
accordance with that finalized policy, the performance period for the 8 
finalized HAC measures and 2 finalized AHRQ measures (discussed below) 
will begin on March 3, 2012. We intend to propose the end performance 
period date for the 8 finalized HAC measures and 2 finalized AHRQ 
measures in the CY 2012 Outpatient Prospective Payment System proposed 
rule.

D. 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) of the Act requires the Secretary to ensure that the 
selected measures for FY 2013 include measures on the following 
specified conditions or topics: AMI; HF; PN; surgeries, as measured by 
the Surgical Care Improvement Project (SCIP); HAIs; and the HCAHPS 
survey. Section 1886(o)(2)(C)(i) of the Act 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 Web 
site for at least 1 year prior to the beginning of the performance 
period. Section 1886(o)(2)(C)(ii) of the Act provides that a measure 
selected under section

[[Page 26496]]

1886(o)(2)(A) of the Act shall not apply to a hospital if the hospital 
does not furnish services appropriate to the measure.
    In the FY 2011 IPPS/RY 2011 LTCHPPS Final Rule (75 FR 50188), we 
stated that in future expansions and updates to the Hospital IQR 
program measure set, we will be taking into consideration several 
important goals. These goals include: (1) 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; (2) expanding the scope of hospital services to which 
the measures apply; (3) considering the burden on hospitals in 
collecting chart-abstracted data; (4) harmonizing the measures used in 
the Hospital IQR program with other CMS quality programs to align 
incentives and promote coordinated efforts to improve quality; (5) 
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 (6) 
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 stated in the proposed rule our belief that we 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. For this reason, we 
proposed 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 proposed 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 proposed to adopt an initial measure set for the Hospital VBP 
program. However, we also proposed to add additional measures to the 
Hospital VBP program in the future in such a way that their performance 
period would 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 proposed 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.
    We 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, patient centered, 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 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.
    As discussed in the Hospital Inpatient VBP Program proposed rule 
(76 FR 2459), to determine which measures to propose to initially adopt 
for the FY 2013 Hospital VBP program, we examined whether any of the 
eligible Hospital IQR measures 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 stated our belief that measuring 
hospital performance on topped-out measures would have no meaningful 
effect on a hospital's total performance score.
    We also stated that scoring a topped-out measure for purposes of 
the Hospital VBP program would present a number of challenges. First, 
as discussed below, we proposed that the benchmark performance standard 
for all measures would be performance at the mean of the top decile of 
hospital performance during the baseline period. We noted in the 
Hospital Inpatient VBP Program proposed rule that, when applied to a 
topped-out measure, this proposed 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 would not be 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 stated 
that 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, we stated 
our belief that data reporting under the Hospital VBP program would not 
be the same for all hospitals. To the extent that a hospital could 
report a higher proportion of topped-out measures, for which its scores 
would likely be high, we stated that we believed 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

[[Page 26497]]

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 (CV) for each of the measures. The 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 5 percent 
of hospitals with the lowest scores, and the 5 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 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 analysis of the impact of including the topped-out measures 
discussed above indicated that their use would mask true performance 
differences among hospitals and, as a result, would fail to advance our 
priorities for the Hospital VBP program. We therefore proposed 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 proposed to initially adopt for the FY 2013 Hospital VBP 
program. We sought comment on that proposal.
    We also examined and sought comment on whether the following 
outcome measures adopted for the Hospital IQR program were appropriate 
for inclusion in the FY 2013 Hospital VBP program. These measures are 
as follows: (1) AHRQ PSIs, IQIs and composite measures; (2) AHRQ PSI 
and nursing sensitive care measure; and (3) AMI, HF, and PN mortality 
measures (Medicare patients). We stated our belief that these outcome 
measures provide important information relating to treatment outcomes 
and patient safety. We also stated in the proposed rule that we 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 Hospital Compare for a 
least 1 year prior to the beginning of the performance period, we 
stated that the AHRQ PSIs, IQIs and composite measures, and the AHRQ 
Nursing Sensitive Care measure were not yet eligible for inclusion in 
the FY 2013 Hospital VBP program. Although these measures are currently 
specified for the Hospital IQR program, we acknowledged that as of the 
time we issued the proposed rule, they did not meet the one year 
Hospital Compare inclusion requirement.
    We also 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, all-cause 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. The 
eligible clinical process of care measures we considered covered AMI, 
HF, PN, and surgeries as measured by the SCIP. Therefore, we believe 
that they meet the requirements of section 1886(o)(2)(B)(i)(I)(aa)-(dd) 
of the Act, which requires us to include measures covering these 
conditions or procedures. Section 1886(o)(2)(B)(i)(ee) of the Act also 
requires the Secretary to select for purposes of the FY 2013 Hospital 
VBP program measures that cover HAIs ``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 discussed 
above were developed to support practices that have demonstrated an 
ability to significantly reduce surgical complications such as HAIs. 
Compliance with the selected 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 Web site. 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); we proposed to 
adopt them for the FY 2013 Hospital VBP program and to categorize them 
under the 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 HCAHPS 
survey. CMS partnered with AHRQ to develop HCAHPS. The HCAHPS survey is 
the first national, standardized, publicly reported survey of patients' 
experience of hospital care, and we proposed to adopt it for the FY 
2013 Hospital VBP program. HCAHPS, also known as the CAHPS[supreg] 
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 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

[[Page 26498]]

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 6 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 Web site, 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 three-state 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 NQF, and in December 2005, the Federal Office of Management and 
Budget gave its final approval for the national implementation of 
HCAHPS for public reporting purposes. 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 in the 
public domain.
    As previously discussed, in determining what clinical process of 
care measures to propose, we analyzed the impact of including topped-
out measures and determined that their use would mask true performance 
differences among hospitals, thus failing to advance our quality 
priorities. As a result, we proposed to exclude 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) from the list of measures we proposed to 
initially adopt for the FY 2013 Hospital VBP program.
    We did not propose 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. 
Therefore, we solicited public comment 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.
    Finally, we proposed to exclude the PN-5c measure from the Hospital 
VBP program. We do not believe that this measure is appropriate for 
inclusion because it could lead to inappropriate antibiotic use. We 
proposed retiring this measure, as well as several other measures that 
we will not adopt for the Hospital VBP program, from the Hospital IQR 
program in the FY 2012 IPPS/LTCH PPS proposed rule scheduled for 
publication on May 5, 2011.
    We proposed to initially select 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 
1.

       Table 1--Proposed 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.
------------------------------------------------------------------------

[[Page 26499]]

 
                   Patient Experience of Care Measures
------------------------------------------------------------------------
HCAHPS............................  Hospital Consumer Assessment of
                                     Healthcare Providers and Systems
                                     Survey.\1\
------------------------------------------------------------------------

    In the Hospital Inpatient VBP Program proposed rule, we solicited 
public comments on our intention to add measures to the Hospital VBP 
Program as rapidly as possible for their availability in future 
performance periods. To that end, we proposed 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 
proposed 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 Hospital Compare for at least 1 year. We proposed that the 
performance period for all of these measures would start exactly 1 year 
after the date these measures were publicly posted on Hospital Compare, 
consistent with section 1886(o)(2)(C)(i). Under this proposed 
subregulatory process for adopting new Hospital VBP program measures, 
we would solicit comments from the public on the appropriateness of 
adopting 1 or more Hospital IQR measures for the Hospital VBP program. 
We would also assess the reported Hospital IQR measure rates using the 
criteria we used to select the measures for the initial FY 2013 
Hospital VBP measure set and would notify the public regarding our 
findings. We stated that we would propose to set performance period end 
dates for any measure we selected for future Hospital VBP program years 
in rulemaking.
---------------------------------------------------------------------------

    \1\ Proposed dimensions of the HCAHPS survey for use in the FY 
2013 Hospital VBP program are: Communication with Nurses, 
Communication with Doctors, Responsiveness of Hospital Staff, Pain 
Management, Communication about Medicines, Cleanliness and Quietness 
of Hospital Environment, Discharge Information and Overall Rating of 
Hospital.
---------------------------------------------------------------------------

    We also proposed to implement a subregulatory process to retire 
Hospital VBP measures. Under the proposed process, we would post our 
intention to retire measures on the CMS Web site at least 60 days prior 
to the date that we would retire the measure. Also, as we do with 
respect to Hospital IQR measures that we believe pose immediate patient 
safety concerns if reporting on them is continued, we proposed that we 
would 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 post 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 made this proposal because it would allow us 
to ensure that the Hospital VBP program measure set focuses on the most 
current quality improvement and patient safety priorities. We solicited 
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.
    In addition, we sought public comment on efficiency measures 
required for inclusion in the Hospital VBP program for value-based 
incentive payments made with respect to discharges occurring during FY 
2014 or a subsequent fiscal year. Specifically, we requested comment on 
what services should be included and what should be excluded in a 
``Medicare spending per beneficiary'' calculation, and what, if any, 
type(s) of hospital segmentation or adjustment should be considered in 
such a measure. We also solicited comment on approaches for measuring 
internal hospital efficiency. We took these comments into account in 
the development of the Medicare spending per beneficiary measure that 
we proposed to adopt in the FY 2012 IPPS/LTCH PPS proposed rule 
scheduled for publication on May 5, 2011, available at http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1).
    The public comments we received are set forth below.
    Comment: Some commenters agreed with our proposed measure set and 
our proposal to exclude PN-5c and structural measures.
    Response: We thank the commenters for their support. We believe 
that the structural measures we have adopted for the Hospital IQR 
program require further development before we can consider adopting 
them for the Hospital VBP program, including the development of an 
appropriate scoring methodology. We also believe that the inclusion of 
PN-5c measure could lead to inappropriate antibiotic use. We also note 
that we have proposed to retire the PN-5c measure from the Hospital IQR 
program in the FY 2012 IPPS/LTCH PPS proposed rule scheduled for 
publication on May 5, 2011 for the same reason that we proposed to not 
include it in the Hospital VBP program measure set.
    Comments: Some commenters noted that CMS is retiring PN-2 
(Pneumococcal Vaccination) and PN-7 (Influenza Vaccination) from the 
Hospital IQR Program and asked why these measures were included in the 
proposed rule. These commenters wanted to know how the retirement of 
these measures from the Hospital IQR Program would affect how these 
measures were collected and scored under the Hospital VBP program. 
Other commenters were concerned about including pneumonia vaccination 
measures in the Hospital VBP program measure set because they stated 
that there may be clinical reasons why a physician does not want a 
patient to receive the vaccination. The commenters suggested adding an 
``allowable value'' or allowable code to the measure specifications to 
avoid penalizing the hospital for that situation.
    Response: Commenters are correct in that we finalized our 
retirement of PN-2 (Pneumococcal Vaccination) and PN-7 (Influenza 
Vaccination) beginning with the FY 2014 Hospital IQR program payment 
determination (75 FR 50211), and hospitals will no longer be required 
to submit data on these measures beginning with January 1, 2012 
discharges (75 FR 50221). Because these measures will cease to continue 
being Hospital IQR program measures midway through the performance 
period we are finalizing for the FY 2013 Hospital VBP program, we do 
not believe that we can include them in the FY 2013 Hospital VBP 
measure set.
    Comment: One commenter requested clarification on whether we 
proposed to include SCIP-Inf-6 in the FY 2013 Hospital VBP measure set.
    Response: Table 2 of the Hospital Inpatient VBP proposed rule (76 
FR 2462) listed our proposed measures for FY 2013, and Table 2 of this 
Final Rule lists the finalized measures. As we

[[Page 26500]]

explained in the Hospital Inpatient VBP proposed rule (76 FR 2461), we 
proposed not to adopt SCIP-Inf-6 for the Hospital VBP program because 
we concluded that the measure had achieved a ``topped out'' status.
    Comment: A commenter suggested that the proposed clinical process 
of care measures are flawed, suggesting that hospitals might choose not 
to submit records that could adversely impact their total performance 
score when submitting quality data.
    Response: All Hospital VBP program measures must be selected from 
the measures specified under the Hospital IQR program, and the data 
that we will use to calculate a hospital's total performance score for 
the clinical process of care measures will be the same data that the 
hospital submitted on those measures under the Hospital IQR program.
    We allow hospitals to submit Hospital IQR clinical process of care 
measure data either by abstracting the necessary data elements from all 
qualifying cases or by submitting data elements taken from a sample of 
those cases. If the hospital chooses to submit a sample, the sample 
must meet the population and sample requirements outlined in the 
Specifications Manual. This Specifications Manual is posted on the CMS 
QualityNet Web site at https://www.QualityNet.org/. The purpose of 
these requirements is to ensure that the sample is statistically valid. 
We also note that we have adopted a process for validating clinical 
process of care measure data submitted under the Hospital IQR program, 
and we stated in the Hospital Inpatient VBP program proposed rule our 
belief that this process will also assure us that the same data is 
accurate for purposes of assessing hospital performance under the 
Hospital VBP program.
    Comment: Several commenters asked if CMS will monitor ``topped-
out'' measures to ensure that they remain ``topped-out''.
    Response: At this time, we do not have a mechanism in place to 
monitor whether measures we do not adopt for the Hospital VBP program 
on the basis that they are topped-out remain topped-out. We will 
consider such monitoring in the future.
    Comment: Some commenters suggested that CMS include in the Hospital 
VBP program measures that meet the definition of ``topped out'' because 
some hospitals will still be able to demonstrate improvement on them.
    Response: As detailed in the Hospital Inpatient VBP proposed rule 
(76 FR 2460), we proposed to define a ``topped out'' measure as a 
measure for which hospital performance at the 75th and 90th percentiles 
are statistically indistinguishable, and the truncated CV was set at 
<0.10. We believe that if a measure is ``topped out,'' there is no room 
for improvement for the vast majority of hospitals, and that measuring 
hospital performance on that measure will not have a meaningful effect 
on a hospital's Total Performance Score. For that reason, we proposed 
to exclude 7 topped-out measures from the FY 2013 Hospital VBP measure 
set.
    Comment: We received several comments asking us to re-run our 
analysis of ``topped-out'' measures using more recent data to determine 
if any other measures also met that status.
    Response: At the time we issued the Hospital Inpatient VBP proposed 
rule, the most recent data that was available to assess whether the 
proposed measures met our proposed definition of ``topped out'' was 
data from July 1, 2008 through March 31, 2009 which was the most recent 
validated data available and publicly displayed under the Hospital IQR 
program. However, since that time, data from the period that we 
proposed to set as the baseline period for the FY 2013 proposed 
measures has been validated (that is, data from the period July 1, 2009 
to March 31, 2010). Therefore, in response to these comments, we 
analyzed all of the proposed FY 2013 measures to see if any of them met 
our proposed definition of ``topped out'' using this more recent data. 
We determined that three additional measures: AMI-2: Aspirin Prescribed 
at Discharge; HF-2: Evaluation of LVS Function; and HF-3: ACEI or ARB 
for LVSD meet our proposed definition of ``topped-out'' based on this 
more recent data. Because one of our goals for the Hospital VBP program 
is to ensure that hospital performance can be meaningfully measured and 
distinguished, we believe that it is appropriate to exclude these three 
additional measures from the FY 2013 Hospital VBP measure set based on 
this more recent analysis.
    Comment: Some commenters suggested that we consider SCIP-Inf-2 and 
PN-3b for ``topped out'' status. Other commenters stated, generally, 
that other measures should be considered for ``topped-out'' status, 
particularly those on which the difference between median performance 
and top performance is small. One commenter stated that it had 
calculated achievement thresholds and benchmark scores for the proposed 
measures using data available on Hospital Compare that most closely 
matched data from CMS' proposed baseline period. The commenter stated 
that its analysis showed that with respect to several measures, 
hospital scores were clustered at a high level of achievement, and 
suggested that such measures should also be considered as ``topped 
out.''
    Response: As discussed above, we examined all of the proposed 
measures using data from the baseline period that we are finalizing in 
this final rule, and determined that three additional measures (AMI-2, 
HF-2, HF-3) are topped-out based on this data. As for other measures, 
including SCIP-Inf-2 and PN-3b, for which performance is high but which 
do not meet the proposed definition of ``topped-out'' based on the more 
recent data, the data show that hospital performance on these measures 
can still be meaningfully distinguished. For this reason, we believe 
that it is appropriate to include these measures in the FY 2013 
Hospital VBP measure set.
    Comment: One commenter suggested that we not include the HF-1 
measure (Discharge Instructions) from the Hospital VBP program because 
the measure does not measure clinical care provided, but instead 
measures administrative processes. Another commenter suggested that we 
exclude AMI-2, HF-1, HF-2 and SCIP-VTE-2 from the Hospital VBP program 
because these measures do not represent a significant improvement in 
the clinical practices required to deliver high value health care.
    Response: We disagree. The HF-1 measure, Discharge Instructions, 
assesses several critical elements important to a discharged patient: 
Activity level, diet, discharge medications, follow-up appointment, 
weight monitoring, and what to do if symptoms worsen. These elements 
are critical to ensuring that patients continue to receive appropriate, 
high-quality health care services after their discharge from the 
hospital. We believe that SCIP-VTE-2 is important for the Hospital VBP 
program because the optimal start of pharmacologic prophylaxis in 
surgical patients can significantly decrease the mortality and 
morbidity associated with blood clot formation.
    As described above, we are not finalizing our proposal to include 
AMI-2 and HF-2 in the FY 2013 Hospital VBP measure set because based on 
an analysis involving data from the proposed baseline period, these 
measures meet our proposed definition of ``topped-out.''
    Comment: One commenter suggested that we review the technical 
specifications for AMI-7a and AMI-8a to ensure that intervention timing 
is based on diagnosis by EKG.

[[Page 26501]]

    Response: The intervention timing for both AMI-7a and AMI-8a runs 
from the time of arrival, not the time of diagnosis by EKG. 
Specifically, the specifications for the AMI-7a measure state that AMI 
patients with ST-segment elevation or Left bundle branch block (LBBB) 
on the EKG closest to arrival time receiving fibrinolytic therapy 
during the hospital stay have a time from hospital arrival to 
fibrinolysis of 30 minutes or less. Similarly, the specifications for 
the AMI-8a measure state that AMI patients with ST-segment elevation or 
LBBB on the ECG closest to arrival time receiving primary PCI during 
the hospital stay have a time from hospital arrival to PCI of 90 
minutes or less. These specifications can be found on the QualityNet 
Web site (http://www.qualitynet.org). We note that these specifications 
are based on clinical guidelines adopted by the American College of 
Cardiology (ACC) clinical guidelines for ST elevation MI.
    Comment: Some commenters expressed support for our exclusion of 
structural measures. Others suggested that we consider using specific 
structural measures in the future such as participation in a systematic 
database or registry.
    Response: We believe these measures require further analysis of how 
they could be scored, and how they would impact a hospital's total 
performance score before they can be adopted for the Hospital VBP 
program. We intend to consider these issues as the Hospital VBP program 
evolves.
    Comment: One commenter suggested including the three smoking 
cessation measures adopted for the Hospital IQR program (AMI-4, HF-4, 
PN-4), despite their ``topped out'' status, because of the risk that 
hospitals will not focus on these measures and overall performance 
could begin to decline.
    Response: These measures meet our proposed definition of topped-out 
status. As we have stated, we do not believe that measuring performance 
on a topped-out measure produces a meaningful differentiation of 
hospital performance. We also note that we have proposed to retire 
these measures from the Hospital IQR measure set in the FY 2012 IPPS/
LTCH PPS proposed rule scheduled for publication on May 5, 2011. 
Therefore, we are excluding these measures from the Hospital VBP 
measure set. We will consider the feasibility of proposing to adopt a 
global smoking cessation measure for the Hospital VBP program.
    Comment: A number of commenters supported our proposal to include 
PN-6 and PN-3b in the Hospital VBP measure set, stating that these 
measures encourage use of new technologies after patient diagnosis.
    Response: We appreciate the support, and we believe that the 
inclusion of these measures will help promote the provision of quality 
care by promoting appropriate laboratory testing (taking of blood 
cultures to facilitate selection of the most effective antibiotic for 
the patient) and actual selection of appropriate antibiotics based on 
patient data.
    Comment: Some commenters supported our proposal to use SCIP 
measures to capture HAIs.
    Response: We thank commenters for their support. As discussed in 
the Hospital Inpatient VBP Program proposed rule (76 FR 2461), the SCIP 
measures were developed to support practices that have demonstrated an 
ability to significantly reduce surgical complications such as HAIs. 
Compliance with the proposed SCIP infection measures is also included 
as a targeted metric in the HHS Action Plan to Prevent Healthcare-
Associated Infections issued in 2009, a copy of which is available on 
the HHS Web site.
    Comment: One commenter suggested that measures should assess 
services regularly provided by rural hospitals and hospitals that do 
not perform surgeries.
    Response: The measures selected for the Hospital VBP program 
address services provided by subsection (d) hospitals, including rural 
hospitals and hospitals that do not perform surgeries. For example, the 
HCAHPS dimensions measure patients' experiences of care at hospitals; 
none of the dimensions are surgery-specific. Additionally, pneumonia 
and other conditions such as heart failure and acute myocardial 
infarction are treated by rural hospitals.
    Comment: A number of commenters called on CMS to use the Joint 
Commission's accountability criteria for measure selection, which 
include strong scientific evidence of improved outcomes, proximity to 
impacted outcomes, accurate assessment of evidence-based processes and 
minimal adverse effects.
    Response: In August 2010, The Joint Commission published an article 
in the New England Journal of Medicine discussing the criteria that 
should be used to define a measure that is used for accountability and 
public reporting purposes versus criteria that is used to define 
measures used strictly for performance improvement. The Joint 
Commission identified four criteria a measure must have in order to 
have the greatest positive impact on patient outcomes. These criteria 
include: Research, Proximity, Accuracy, and Adverse Effects. Further 
information on the Joint Commission's accountability criteria may be 
found at http://www.jointcommission.org/about/JointCommissionFaqs.aspx?CategoryId=31. We generally agree with the 
Joint Commission's list of criteria that would apply to measures used 
for accountability purposes and considered this criteria in determining 
whether certain measures may warrant retirement from the Hospital IQR 
program. However, we do not agree with their exclusion of HF-1 from the 
list of accountability measures as we believe HF-1 assesses a 
hospital's compliance with providing critical information to patients 
at the time of their discharge, including instructions regarding 
activity level, diet, discharge medications, follow-up appointment, 
weight monitoring, and what to do if symptoms worsen. As stated above, 
we believe that this information is critical for hospitals to provide 
in order to facilitate appropriate self-care and provider follow up 
care after a patient is discharged from the hospital.
    Comment: A number of commenters recommended that we analyze 
measures against pre-established, agreed-upon criteria to ensure that 
they are relevant to value-based purchasing and will improve health 
outcomes for patients. Some commenters suggested that our goal should 
be to find the most appropriate ways to tie measures to patient 
benefits. Some commenters argued that current measures which we have 
proposed to adopt for the Hospital VBP program do not sufficiently 
impact health outcomes. Other commenters wondered if any measures are 
``paper-only'' and do not reflect the actual provision of quality 
medical care.
    Response: To ensure that measures assess the quality of care 
provided to Medicare beneficiaries, we agree that measures should be 
scrutinized by experts and evaluated against objective criteria. We 
believe that these elements have been incorporated into our measure 
selection process in a variety of ways, including through endorsement 
by consensus-developing entities and through notice and public comment 
rulemaking. For example, most of the measures that we have selected for 
the Hospital IQR program, (which make them candidates for the Hospital 
VBP program) are endorsed by the NQF, the entity with a contract with 
the Secretary under Section 1890(a) of the Act. To the extent that we 
have determined that measurement is needed in a specified area for 
which there are no NQF endorsed measures, we give due consideration to 
measures endorsed or adopted by different consensus

[[Page 26502]]

organizations before specifying the measure. We also consider whether 
the measures meet the goals of the National Priorities Partnership, 
enable the Department to further its strategic goals and initiatives, 
and whether they are adopted by the HQA. This has resulted in our 
adoption of meaningful measures that assess the quality of care 
furnished by hospitals.
    Comment: A few commenters were concerned that the HCAHPS scores 
publicly reported on Hospital Compare differ by bed size, type of 
hospital and geography and thought the HCAHPS scores should be adjusted 
for these factors. These commenters thought HCAHPS needs to be vetted 
more to understand these differences to ensure that HCAHPS is a 
reliable measure.
    Response: Although we recognize that HCAHPS results differ by bed 
size and other hospital characteristics, we do not interpret these 
differing results to mean that the survey should be risk adjusted. 
HCAHPS results also differ among hospitals with the same 
characteristics, which we view as evidence that the results account for 
differences in the quality of care received by patients. In general, 
risk adjustment models control for exogenous factors that are beyond 
the control of a hospital, not for hospital characteristics that are 
endogenous, or within their control.
    We also believe that the HCAHPS survey has been thoroughly vetted, 
including through reviews in peer-reviewed journals and through notice 
and comment rulemaking when we adopted it for the Hospital IQR program, 
and it is endorsed by the NQF.
    Comment: One commenter questioned whether top-box responses in the 
HCAHPS survey are appropriate for urban, safety net hospitals that 
serve culturally diverse patients and may not be able to ``always'' 
communicate well with their patients.
    Response: The ``top-box'' response to HCAHPS survey items is the 
most positive response that a patient can provide (often presented in 
the survey as ``Always''). Medicare does not have an indicator for a 
``safety net hospital.'' However, we have examined the HCAHPS results 
submitted by urban hospitals, which we believe can serve as a rough 
proxy for a ``safety net hospital.'' Urban hospitals, particularly 
large ones, have historically not performed as well on HCAHPS as rural 
hospitals. However, our internal studies of HCAHPS results show that 
hospitals in the following urban areas scored in the top 25 percent of 
hospitals overall: New York City, Boston, Baltimore, Atlanta, Chicago, 
Los Angeles, San Francisco, San Diego, Phoenix, Dallas, Houston, and 
San Antonio. We believe that these results suggest that urban hospitals 
are not being disadvantaged by the HCAHPS measurement.
    Comment: Several commenters questioned the reliability of HCAHPS 
data. Some suggested that we consider possible negative consequences 
associated with its use.
    Response: Since its national implementation in October 2006, when 
hospitals began to administer the HCAHPS survey, our analyses of HCAHPS 
results has shown that this standardized, publicly reported survey of 
patients' experience of hospital care is satisfactorily reliable at 100 
completed surveys using statistical measures of reliability that 
calculate the proportion of the variance in reported hospital scores 
that is due to true variation between hospitals, rather than within 
hospital variation that reflects limited sample size.
    We also note that since public reporting of HCAHPS scores began 
under the Hospital IQR program[?] in March 2008 there have been small 
but statistically significant improvements in 9 of 10 HCAHPS 
dimensions.\2\ In addition, we are aware of abundant anecdotal evidence 
that hospitals are engaging in quality improvement efforts aimed at 
improving the quality of the inpatient experience. We believe that 
HCAHPS, in part, motivates these efforts and expect that hospitals will 
continue to improve their patients' experience of care as the 
incentives for doing so become more salient.
---------------------------------------------------------------------------

    \2\ See ``Hospital Survey Shows Improvements in Patient 
Experience.'' M.N. Elliott, W.G. Lehrman, E.H. Goldstein, L.A. 
Giordano, M.K. Beckett, C.W. Cohea and P.D. Cleary. Health Affairs, 
29 (11): 2061-2067. 2010.
---------------------------------------------------------------------------

    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, we also 
proposed that, for inclusion in the Hospital VBP program for FY 2013, 
hospitals must report a minimum of 100 HCAHPS surveys during the 
performance period. Our statistical analyses show that HCAHPS is a 
reliable measure of patient experience and, therefore, we see no 
negative consequences with its use.
    Comment: One commenter provided suggestions for additional items 
regarding palliative care that could be added to the HCAHPS instrument; 
another commenter suggested that CMS add questions about patient 
activation (patients' knowledge, skills, and confidence for self-
management), care coordination, shared decision-making and support for 
patient self-management.
    Response: As part of our ongoing maintenance activities for the 
HCAHPS survey, which include assessing whether it needs to be updated, 
we will consider the feasibility of adding the suggested survey items.
    Comment: One commenter wanted to exclude the doctor communication 
dimension from the HCAHPS measure, reasoning that hospital payment 
under the IPPS should not be based in part upon physician behavior that 
it cannot control.
    Response: We are including the doctor communication dimension as an 
HCAHPS dimension because it is a key aspect of care from the 
perspective of consumers. In addition, many hospitals employ their own 
doctors (hospitalists) who are directly under the hospitals' control.
    Comment: Some commenters opposed combining the cleanliness and 
quiet items because they are conceptually different and the cleanliness 
item is important for patient safety.
    Response: We thank commenters for their input. Although these two 
items were originally proposed to be one composite in the survey, we 
separated them into two individual measures for public reporting prior 
to the 2006 national implementation because it made more sense for 
consumers to see ``clean'' and ``quiet'' as distinct environmental 
aspects of hospitals. The ``clean'' and ``quiet'' HCAHPS measures will 
continue to be publicly reported separately on Hospital Compare for the 
Hospital Inpatient Quality Reporting program.
    For purposes of the Hospital VBP program, these two items were 
combined so as not to put more weight on the environmental items 
compared to the rest of the HCAHPS items, which are composite measures 
(with the exception of Overall Rating). If the environmental items were 
separated, quietness of the hospital environment, for example, would 
receive as much weight as nurse communication, which includes 3 items 
from the HCAHPS survey. The combined ``cleanliness and quietness'' 
HCAHPS dimension will be publicly reported on Hospital Compare as part 
of the Hospital VBP program.
    Comment: Some commenters were concerned that the risk adjustment 
models for the HCAHPS survey are not adequate and do not control for 
the severity of a patient's condition, socio-economic status, and 
geographic differences

[[Page 26503]]

    Response: HCAHPS dimensions are currently patient-mix adjusted. We 
adjust HCAHPS data for patient characteristics that are not under the 
control of the hospital that may affect patient reports of hospital 
experiences. The goal of adjusting for patient-mix is to estimate how 
different hospitals would be rated if they all provided care to 
comparable groups of patients. As part of the endorsement process for 
HCAHPS, the NQF endorsed the HCAHPS patient-mix adjustment currently in 
use.
    The HCAHPS patient-mix adjustment (PMA) model incorporates 
important and statistically significant predictors of patients' HCAHPS 
ratings that also vary meaningfully across hospitals (O'Malley et al., 
2005). The PMA model includes seven variables, as follows: Self-
reported health status, education, service line (medical, surgical, or 
maternity care), age, response percentile order (also known as 
``relative lag time,'' which is based on the time between discharge and 
survey completion), service line by linear age interactions, and 
primary language other than English. Initially the model also included 
admission through an emergency room, but because admission through an 
emergency room is no longer available on the UB-92 Form, this adjuster 
is no longer available for the patient-mix model. We are exploring 
other options to obtain that information in the future. We have found 
that evaluations of care increase with self-rated health and age (at 
least through age 74), and decrease with educational attainment. 
Maternity service has generally more positive evaluations than medical 
and surgical services. Percentile response order (relative lag time) 
findings show that late responders tend to provide less positive 
evaluations than earlier responders. From research conducted during the 
development of HCAHPS, we found little evidence that DRG matters beyond 
the service line, which is included in the patient mix model.
    To further address specific concerns about the adjustment model, it 
is important to note that self-reported health status is a widely 
accepted measure of a person's overall health status. In general, ``how 
would you rate your health'' is the most widely used single self-
reported health item and is used in a plethora of national health 
surveys. Education also captures important aspects of socio-economic 
status. Income is generally not available to adjust survey data.
    Patient-mix adjustment is based on variation by patient-level 
factors within hospitals so that true differences between hospitals are 
not included in the adjustment.\3\ Controlling for geographic region (a 
hospital-level factor) as part of a patient-mix adjustment model could 
mask important differences in quality across the country.
---------------------------------------------------------------------------

    \3\ See ``Adjusting Performance Measures To Ensure Equitable 
Plan Comparisons.'' Zaslavsky, A.M., L.B. Zaborski, D.J.A. Shaul, 
M.J. Cioffi, and P.D. Cleary. Health Care Financing Review'' 22(3): 
109-26. 2001.
---------------------------------------------------------------------------

    Comment: Several commenters suggested changing the HCAHPS 
requirements to reduce the number of required mailings and telephone 
attempts, allow survey administration while patients are still in the 
hospital, and allow electronic administration of the survey to reduce 
the cost of survey administration.
    Response: We know from our HCAHPS research that, on average, late 
responders report less positive experiences. For this reason, we 
believe that allowing hospitals to reduce their effort to obtain 
completed surveys by reducing the required number of mailings and 
telephone attempts would bias the HCAHPS results. Under the current 
HCAHPS requirements, which can be found in the HCAHPS Quality Assurance 
Guidelines available at www.hcahpsonline.org, the administration of the 
HCAHPS survey begins 48 hours following discharge to ensure that the 
patient has had an opportunity to return home or go to an alternative 
location. We also believe that allowing a hospital to administer the 
survey while the patient is still in the hospital has the potential to 
create biased results because the patient might not feel that he or she 
can freely answer the questions with hospital staff nearby.
    We note that we have tested an Internet version of HCAHPS. However, 
at this point, we do not believe that hospitals routinely collect e-
mail addresses or that the Medicare population has enough experience 
with the Internet to support allowing hospitals to administer the 
survey via the Internet. This is a technology that we will continue to 
explore because we agree with the commenters that electronic 
administration of the survey would be less expensive for hospitals.
    Comment: One commenter was concerned that patients would be more 
likely to recommend larger hospitals due to the spectrum of services 
offered by them and, thus, smaller and rural hospitals would be 
disadvantaged by HCAHPS.
    Response: Because HCAHPS focuses on the actual experiences of care 
by asking patients about what happened during the hospital stay, the 
HCAHPS data are not biased by the perceptions of patients in terms of 
the range of services offered by different hospitals. In fact, smaller 
hospitals generally tend to do better on HCAHPS relative to larger 
ones.
    While most HCAHPS survey items assess the patient's actual 
experience in the hospital, two survey items ask for the patient's 
overall impressions of the hospital stay. Because these items are 
highly correlated and potentially draw on wider influences, we have 
proposed to include only one global dimension, Overall Rating, in the 
Hospital VBP program scoring for the HCAHPS measure.
    Comment: Some commenters called on us to make HCAHPS patient mix 
adjustment formulas public.
    Response: The HCAHPS patient-mix adjustment formulas are publicly 
available on http://www.hcahpsonline.org. The data on http://www.hcahpsonline.org regarding the adjustments are updated quarterly.
    Comment: Some commenters opposed the use of 30-day mortality rates 
in the Hospital VBP program because they are ``all-cause'' measures and 
do not exclude deaths that are not attributable to a hospital's quality 
of care. One commenter questioned the use of the mortality measures, 
citing the possibility of unintended consequences and remarking that, 
``unless hospitals are provided with specific interventions which have 
been demonstrated to reduce morality, penalizing a hospital for an 
increase in mortality (or rewarding one for a decrease in mortality) is 
not rationally related to the operations of the hospital.'' Other 
commenters argued that the Hospital VBP program should focus on outcome 
measures that are risk adjusted to account for extremely ill patients.
    Response: We appreciate commenters' input on measures for use in 
the Hospital VBP program. The proposed all-cause risk adjusted 30-day 
mortality measures are endorsed by the National Quality Forum (NQF). 
There are several reasons why we believe it is appropriate for us to 
adopt the NQF-endorsed all-cause mortality measures for the Hospital 
VBP program.
    First, from the patient perspective, death is the key outcome 
regardless of its cause. Second, cause of death may be unreliably 
recorded. Third, the cause of death may represent a complication 
related to the underlying condition. For example, a patient with HF who 
develops a hospital-acquired infection may ultimately die of sepsis and 
multi-organ failure. It would be inappropriate to consider the death as 
unrelated to the care the patient received for HF.

[[Page 26504]]

Another patient might have a complication leading to renal failure, 
resulting in death, and yet quality of care could have reduced the risk 
of the complication. A patient with PN who did not receive deep vein 
thrombosis prophylaxis may ultimately die of a pulmonary embolism. It 
would be inappropriate to consider the death as unrelated to the care 
the patient received for PN. Although this approach will include some 
patients whose death may be unrelated to their care (for example, a 
casualty in a motor vehicle accident), events completely unrelated to 
the admission are expected to be uncommon and should not be clustered 
unevenly among hospitals.
    Furthermore the NQF-endorsed measure methodology for all three of 
these all-cause mortality measures includes a risk adjustment for 
protein-calorie malnutrition, dementia, and metastatic cancer that are 
common among extremely ill patients.
    Comment: Some commenters suggested that we should ensure that 
measures, particularly those added in FY 2014, appropriately capture 
services provided by hospitals, as not all hospitals treat all 
conditions.
    Response: We agree and note that we proposed that hospitals must 
have at least 10 cases per measure in order to be scored on that 
measure and report on at least 4 measures to be included in the 
Hospital VBP program. We also believe that the finalized Hospital VBP 
measures capture a broad range of hospital services, which will enable 
a large number of hospitals to participate in the program.
    Comment: One commenter suggested that we proceed cautiously in 
seeking to adopt outcome measures for the Hospital VBP program, and 
that we first demonstrate their statistical reliability for low-volume 
hospitals.
    Response: We agree that acceptable statistical reliability is 
important to our analysis in determining what measures to adopt for the 
Hospital VBP program. As stated above, we conducted analyses on the 30-
day outcome measures we are adopting for this program and have found 
them to be reliable for all hospitals for purposes of Hospital VBP 
scoring.
    Comment: One commenter suggested that CMS use an error bar or other 
visual display of the confidence intervals surrounding mortality rate 
performance similar to the displays currently used on Hospital Compare 
for mortality measures.
    Response: The confidence intervals currently shown on Hospital 
Compare are used to classify hospitals into broad categories for 
purposes of that display. For the Hospital VBP program, we will score 
all of the Hospital VBP measures using the scoring methodology that we 
finalize for the program. The use of this scoring methodology will 
result in each hospital being assigned a point estimate that reflects 
its score on each of the mortality measures, and it is those scores, 
rather than broad confidence intervals, that will be used for purposes 
of the public reporting.
    Comment: Some commenters expressed general support for the 3 
proposed 30-day mortality measures.
    Response: We thank commenters for their support.
    Comment: Some commenters suggested that we exclude some types of 
cases, including hospice or palliative care, from the mortality measure 
calculations. They also suggested that this ``new'' mortality rate 
measurement without hospice and palliative care patients should be 
displayed on Hospital Compare for one year prior to implementation.
    Response: The risk-adjusted mortality measure methodology excludes 
admissions for Medicare fee-for-service patients who elect hospice care 
any time in the 12 months prior to the index hospitalization, including 
the first day of the index admission. Information on the methodology 
used to calculate the measures can be found at http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1163010398556.
    Comment: Many commenters opposed our proposal to adopt HAC measures 
for the FY 2014 Hospital VBP program, arguing that we will be 
penalizing hospitals on those measures both under the Hospital VBP 
program, the HAC policy required by Section 3008 of the Affordable Care 
Act and the Medicaid penalties required by Section 2702 of the 
Affordable Care Act.
    Response: We view the program authorized by section 3008 of the 
Affordable Care Act and the Hospital VBP Program as being related but 
separate efforts to reduce HACs. Although the Hospital VBP program is 
an incentive program that provides incentive-based payments to 
hospitals based on quality performance, the program established by 
section 3008 of ACA creates a payment adjustment resulting in payment 
reductions for the lowest performing hospitals. We also view programs 
that could potentially affect a hospital's Medicaid payment as separate 
from programs that could potentially affect a hospital's Medicare 
payment, although we intend to monitor the various interactions of 
programs authorized by the Affordable Care Act and their overall impact 
on providers and suppliers.
    Comment: Several commenters requested that we ensure the 
harmonization of new programs and any overlay or duplication in the 
Affordable Care Act, generally.
    Response: We are coordinating the development and implementation of 
all of these programs and will continue to monitor their impacts on 
providers and suppliers.
    Comment: Some commenters argued that CMS should analyze HAC 
measures more closely to test the validity of ``present on admission'' 
(POA) diagnosis coding. The commenters suggested that CMS compare POA 
coding to chart-review to test the appropriateness of using claims-
based measures for payment purposes. Commenters more generally argued 
that the current measure format does not allow for valid comparisons 
due to coding issues and physician behavior.
    Response: The purpose of POA coding is to allow better discernment 
of whether a diagnosis is a complication of care received in the 
hospital or an adverse event occurring in the hospital. Beginning in FY 
2007, we have proposed, solicited, and responded to public comments and 
have implemented the Hospital Acquired Condition Program under section 
1886(d)(4)(D) of the Act and its accompanying POA coding requirement 
through the IPPS annual rulemaking process. For specific policies 
addressed in each rulemaking cycle, we direct readers to the following 
publications: the FY 2007 IPPS proposed rule (71 FR 24100) and final 
rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed rule (72 FR 
24716 through 24726) and final rule with comment period (72 FR 47200 
through 47218); the FY 2009 IPPS proposed rule (73 FR 23547), and final 
rule (73 FR 48471); and the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule 
(74 FR 24106) and final rule (74 FR 43782). A complete list of the 10 
current categories of HACs is included in section II.F.2.of FY 2011 
IPPS/RY 2011 LTCH PPS (75 FR 50080 through 50101).
    POA coding is also used in the specifications for the component 
indicators for the AHRQ Patient Safety composite measure we proposed to 
adopt for the Hospital VBP program for FY 2014. This composite measure 
consists of 8 component indicators, including PSI-3 (Pressure ulcer), 
PSI-6 (Iatrogenic Pneumothorax), PSI-7 (Central venous catheter-related 
bloodstream infections), PSI-8 (Postoperative hip fracture), PSI-12 
(Postoperative pulmonary embolism or

[[Page 26505]]

deep vein thrombosis), PSI-13 (Postoperative sepsis), PSI-14 
(Postoperative wound dehiscence), and PSI-15 (Accidental Puncture or 
Laceration). For each of these component indicators, present-on-
admission coding is one of the exclusion criteria used to indicate 
whether a condition or an injury occurred before or after the patient 
was admitted to the hospital. Please refer to 
www.qualityindicators.ahrq.gov for further details about the technical 
specifications for these measures. We are using the POA information on 
the final adjudicated claim submitted by the hospital. These data are 
subject to the same scrutiny as other information on Medicare claims.
    We also note that we are currently evaluating the Hospital Acquired 
Condition-Present on Admission (HAC-POA) Program. We appreciate the 
commenters' interest and will take it into consideration as we proceed 
with this evaluation.
    Comment: Some commenters noted that the proposed HAC measures are 
limited to the Medicare fee-for-service population and suggested that 
these measures should not be used in Hospital VBP.
    Response: The proposed HAC measures are calculated using only 
Medicare fee-for-service data because we do not currently have access 
to claims data that is submitted by hospitals to other payers. We also 
note that POA codes, which are required to calculate all of the 
proposed HAC measures and which must be included on Medicare Part A 
claims submitted to CMS by hospitals, may not be required to be 
included on inpatient claims submitted by hospitals to other payers. 
Despite this data limitation, we believe that the proposed HAC measures 
provide important information regarding patient safety events occurring 
during hospitalization, which reflect the quality of patient care 
provided, and we believe these measures should be included in the 
Hospital VBP program.
    Comment: Some commenters questioned whether value-based incentive 
payments will be available only to Medicare FFS and Medicare cost 
payers and not Medicare Advantage Organization (MAO) payers.
    Response: Value-based incentive payments made under the Hospital 
VBP program can be made only in the form of an adjustment to a 
subsection (d) hospital's base operating DRG payment amount under the 
IPPS.
    Comment: Some commenters noted that the proposed HAC measures do 
not capture more than 9 diagnoses.
    Response: CMS' current system limitations allow for the processing 
of only the first 9 diagnoses and 6 procedures. While CMS accepts all 
25 diagnoses and 25 procedures submitted on the claims, we do not 
process all of the codes because of these system limitations.
    In the FY 2011 IPPS/LTCH-PPS final rule, we discussed our plans to 
accept and process up to 25 diagnoses and procedures on the hospital 
inpatient claims submitted on the 5010 format beginning January 1, 2011 
(75 FR 50127 through 50128). In the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule, we responded to hospitals' requests that we process up to 25 
diagnosis codes and 25 procedure codes (74 FR 43798). In that FY 2010 
IPPS/RY 2010 LTCH PPS final rule, we referred readers to the ICD-10 
final rule (74 FR 3328 through 3362) where we discuss the updating of 
Medicare systems prior to the implementation of ICD-10 on October 1, 
2013. We mentioned that part of the system updates in preparation for 
ICD-10 is the ``expansion of our ability to process more diagnosis and 
procedure codes.'' In the FY 2009 IPPS final rule (73 FR 48433 through 
48444), we also responded to multiple requests to increase the number 
of codes processed from 9 diagnosis and 6 procedure codes to 25 
diagnosis and 25 procedure codes.
    We are currently making extensive system updates as part of the 
move to 5010, which includes the ability to accept ICD-10 codes. This 
complicated transition involves converting many internal systems prior 
to October 1, 2013, when ICD-10 will be implemented. One important step 
in this planned conversion process is the expansion of our ability to 
process additional diagnosis and procedure codes. We are currently 
planning to complete the expansion of this internal system capability 
so that we are able to process up to 25 diagnoses and 25 procedures on 
hospital inpatient claims as part of the HIPAA ASC X12 Technical 
Reports Type 3, Version 005010 (Version 5010) standards system update.
    Comment: Many commenters recommended that CMS develop risk 
adjustment methods, measure exclusion criteria, or stratified scoring 
methods to account for variations in measure rates related to patient 
factors or hospital function. Commenters argued that many of the 
proposed outcome, patient experience, and other measures including 
HCAHPS, HACs, and mortality measures are not valid because they lack 
appropriate risk adjustment and exclusion criteria and called for their 
exclusion from the Hospital VBP program. One commenter suggested risk 
adjustments should specifically be employed for trauma patients. A 
number of commenters suggested that CMS consider other risk adjustment 
models used by the industry, such as those promulgated by the Society 
of Thoracic Surgeons. One commenter suggested that we include ``median 
income of ZIP code of residence'' in a risk adjustment methodology for 
mortality measures in order to account for socioeconomic variables that 
may lead to a greater rate of mortality. Additionally, some commenters 
suggested that CMS convene experts to develop a ``population 
adjustment'' and adopt only HACs that do not rely on claims data for 
the Hospital VBP program.
    Response: For the measures that currently employ risk adjustment, 
we are using the risk adjustment models that are part of the NQF-
endorsed measure specifications. In developing its risk adjustment 
model for the 30-day measures, the NQF performed an extensive 
literature review of risk factors employed by other models to inform 
the development of its model. We note that the current risk adjustment 
methodology for the three proposed mortality measures for FY 2014 was 
recently reevaluated and approved by an NQF steering committee. There 
is no risk adjustment for race and socioeconomic status, which we 
believe is appropriate because we do not want to hold hospitals with 
different racial or SES mixes to different performance standards. 
Adjusting for race or SES would also obscure differences that are 
important to identify if we want to reduce disparities where they do 
exist. We note that the NQF has issued guidance recommending against 
adjusting for patient characteristics such as socioeconomic status in 
outcomes measures, located at: http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx. We welcome collaboration on this 
issue with providers that serve unique patient populations and 
functions.
    Furthermore, while we understand that claims-based measures such as 
HAC measures have certain limitations, as discussed below, HAC measures 
were defined in prior rulemaking, during which we conducted several 
listening sessions and had the benefit of receiving public comment. We 
note that some of the HACs are ``never'' events and therefore should 
not be risk adjusted. We will consider refinements to the HAC measures 
in future years. We will monitor the impact of the Hospital VBP program 
on the care provided to

[[Page 26506]]

vulnerable subpopulations of patients, including trauma patients.
    Comment: Some commenters argued that the proposed HAC measures 
should be risk-adjusted before they are used in Hospital VBP.
    Response: Six of the 8 HACs adopted for the Hospital VBP program 
are considered ``never events,'' for which risk adjustment would not be 
appropriate because, in our view, such events should never happen under 
any circumstances. In the event that we do decide that some type of 
risk adjustment would be appropriate, we will seek input from the NQF 
as to whether or not this constitutes a substantive change to the 
measures, in which a formal consensus development process will be 
initiated. We will consider further refinements to the HAC measures in 
future years. We note that when we adopted the HAC vascular catheter-
associated infection measure and the catheter-associated urinary tract 
infection measure in the FY 2008 IPPS final rule with comment period 
(72 FR 47202 through 47218), there were no related risk-adjustments 
under the DRG payment policy reforms (72 FR 47141).
    Comment: Some commenters suggested that measures should be approved 
by the Hospital Quality Alliance (HQA) before use in the Hospital VBP 
program.
    Response: In developing the Hospital VBP program, we took into 
account the input of a multitude of stakeholders, including the HQA. 
The HQA is a national, public-private collaboration committed to making 
meaningful, relevant, and easily understood information about hospital 
performance accessible to the public and to informing and encouraging 
efforts to improve quality. We will also continue to consider HQA input 
as part of our ongoing measure selection process for the Hospital VBP 
program.
    Comment: Some commenters argued that the low incidence rates of 
HACs, particularly in academic medical centers, would lead to unstable 
statistics on which to base comparisons between hospitals.
    Response: Low incidence of events does not equate to unstable rates 
for those events. We acknowledge that the rates of some of the HACs, 
particularly the ones measuring `never events', may be rare. However, 
because these are considered events that should never happen, reporting 
their prevalence, though rare, is still meaningful. We have not found 
that HAC incidence is particularly low in academic medical centers. We 
believe that all of the proposed HAC measures are important to measure 
and report, despite their low incidence rates, and that the public 
reporting of the HACs on the Hospital Compare Web site will encourage 
improvement. We believe that the Hospital VBP program must emphasize 
patient safety and improved quality of health care, and we believe that 
holding hospitals accountable for HACs will further those goals.
    Comment: Some commenters asked us to discuss the inclusion of HAIs 
in HACs. Specifically, the commenters asked us to include additional 
detail on how CMS plans to implement HHS's HAI Action Plan.
    Response: Two of the eight proposed HAC measures (Vascular 
Catheter-Associated Infection and Catheter-Associated Urinary Tract 
Infection) capture HAIs. We are considering the feasibility of 
proposing to adopt all of the metrics listed in the HAI Action Plan for 
the Hospital IQR program in future years. In the FY 2011 IPPS/LTCH PPS 
final rule, we adopted two of the HAI measures from the HHS HAI Action 
Plan: the central line-associated bloodstream infection measure, for 
which reporting began with respect to January 2011 events; and the 
surgical site infection measure, which hospitals will begin reporting 
with respect to January 2012 events. In addition, we have proposed in 
the FY 2012 IPPS/LTCH PPS proposed rule scheduled for publication on 
May 5, 2011, to adopt additional HAI measures: Catheter-associated 
urinary tract infection measure, central line insertion practices 
adherence percentage; Methicillin-resistant Staphylococcus aureus 
(MRSA), Clostridium difficile (C-Diff), and Health Care Personnel 
Influenza Vaccination measures. All of these measures, if finalized for 
the Hospital IQR program, will be eligible for inclusion in the 
Hospital VBP program, and would allow CMS to better address the 
important topic area of Healthcare Associated Infections.
    Comment: Some commenters noted that HACs are not entirely 
preventable and argued that they should not be a component of quality 
measurement.
    Response: We believe that all 8 proposed HAC measures assess the 
presence of hospital acquired conditions that are reasonably 
preventable if high quality care is furnished to the patient. We also 
believe that the incidence of HACs in general raise major patient 
safety issues for Medicare beneficiaries. According to the 2010 
Department of Health and Human Services Office of the Inspector General 
Report, entitled ``Adverse Events in Hospitals: National Incidence 
among Medicare Beneficiaries,'' an estimated 13.5 percent of 
hospitalized Medicare beneficiaries experienced adverse events during 
their hospital stays (OIG, November 2010, OEI-06-09-00090). We proposed 
to adopt 8 HAC measures for the Hospital VBP program because they are 
outcome measures (which are widely regarded by the provider community 
as strongly indicative of quality of medical care) that assess whether 
certain adverse events occurred during hospitalization. We believe that 
the adoption of these measures will facilitate our on-going efforts to 
hold hospitals accountable for these events, as well as reduce the 
incidence of these adverse events that result in harm to Medicare 
beneficiaries and higher costs of care.
    Comment: Some commenters asked us to explain why HACs are 
appropriate for quality measurement and scoring given that they are 
derived from billing and payment methods.
    Response: We believe that public reporting of the HACs on the 
Hospital Compare Web site will encourage improvement. We acknowledge 
that the incidence of HACs may be rare. However, many of the HACs are 
considered events that should never happen; reporting their prevalence, 
though rare, is still meaningful.
    Medicare fee for service claims data is the source for many 
measures that are NQF endorsed. This data source was reviewed as part 
of the NQF endorsement process for such measures, and has been found to 
be an appropriate data source. We also refer readers to the FY 2008 
IPPS final rule with comment period (72 FR 47202 through 47218); 
section II.F. of the FY 2009 IPPS final rule with comment period (73 FR 
48474 through 48486); and section II.F. of the FY 2010 IPPS/RY 2010 
LTCH PPS final rule (74 FR 43782 through 43785) for detailed 
discussions regarding the selection of the current 10 HAC categories.
    Comment: Some commenters suggested that CMS consider integrating 
HACs, complications and other causes of waste into an efficiency domain 
rather than in clinical process or outcomes.
    Response: We believe that the proposed HAC measures best capture 
health care quality outcomes rather than efficiency and are therefore 
best included in the outcome domain.
    Comment: One commenter suggested that we revise the definition of 
Falls and[?] Trauma. Specifically, the commenter suggested that the 
definition should be revised to require not only these injury codes, 
but also an e-code related to falls that are not POA.
    Response: We appreciate the suggestion to refine the definition of 
this

[[Page 26507]]

HAC, and will consider refinements for future implementation.
    Comment: Some commenters requested that we provide detailed measure 
specifications for the proposed HAC measures immediately if we intend 
to use them in the Hospital VBP program.
    Response: The specifications for these proposed measures were made 
available on QualityNet at http://www.qualitynet.org earlier in the 
year.
    Comment: Some commenters were opposed to the use of Nursing 
Sensitive measures in the Hospital VBP measure set while others, noting 
that nurses provide numerous services to patients, argued that nursing 
sensitive measures are essential quality indicators.
    Response: We agree that nurses provide numerous services to their 
patients, and we are interested in nursing sensitive measures because 
those measures capture many processes and outcomes that are influenced 
by nursing practice. Currently, we only have one nursing sensitive 
measure in the Hospital IQR Program: Death among surgical inpatients 
with serious treatable complications (AHRQ PSI-04). We are also 
collecting the structural measure ``Participation in a Systematic 
Clinical Database Registry for Nursing Sensitive Care''. We will 
consider adopting one or more measures in the nursing sensitive 
category for the Hospital IQR and Hospital VBP programs in the future.
    Comment: Some commenters opposed the use of any AHRQ PSI and IQI 
measures or their composites in Hospital VBP. Others suggested that 
those measures should be evaluated for validity and reliability as they 
were not developed to be performance measures and are based on claims 
data. Others noted that hospitals have encountered technical and 
programming issues with respect to the proposed AHRQ measures.
    Response: We thank commenters for their input. The AHRQ PSI and IQI 
measures that we proposed to adopt for the Hospital VBP measure set are 
NQF endorsed. In order to achieve NQF endorsement, measures must meet 
all of the criteria of the NQF consensus development process. 
Information on this process can be found at: http://www.qualityforum.org/Measuring_Performance/Consensus_Development_Process.aspx. We believe this consensus development process includes 
the necessary steps to assure that measures that are NQF endorsed have 
been tested for validity and reliability of the data. This endorsement 
includes the data source needed to calculate the measures (Medicare fee 
for service claims). We believe these measures are appropriate for use 
in the Hospital VBP program as they meet the statutory requirements for 
inclusion and address the topic of patient safety, which is a high 
priority that we believe should be addressed in the Hospital VBP 
program. We also note that because these measures are claims-based, no 
separate data reporting is needed.
    Comment: One commenter objected to the use of PSI 4, arguing that 
about 25 percent of surgical patients are admitted with sepsis or acute 
illness and multiple organ failure for surgical exploration, then coded 
as surgical patients even if the surgery doesn't find anything and 
doesn't contribute to death.
    Response: We have not proposed to adopt PSI 4, Death among surgical 
inpatients with serious, treatable complications, for inclusion in the 
Hospital VBP program. However, we note that the specifications for that 
measure specifically exclude patients with a diagnosis of sepsis or 
infection in the primary diagnosis field and patients who are 
immunosuppressed.
    Comment: Some commenters argued that the proposed AHRQ measures 
amount to double-counting for purposes of scoring, as two of the 
proposed AHRQ measures are composites of the other AHRQ measures.
    Response: We appreciate commenters' concerns. We agree that the use 
of all of the proposed AHRQ measures, including the two composite 
measures, would result in ``double-counting'' each of the individual 
measures. While each of the individual AHRQ measures capture important 
components of quality care, we believe that scoring hospital 
performance on the two composite measures simply and clearly captures 
the provision of high quality care that we wish to incentivize in the 
Hospital VBP program. Therefore, we are only finalizing the 2 proposed 
AHRQ composite measures, which will avoid any double-counting.
    Comment: Some commenters argued that all outcome, process, and 
patient experience measures should be posted on Hospital Compare for 
one year prior to use in the Hospital VBP program, and that, during 
this year, CMS should provide quarterly hospital preview reports on 
qualitynet.org with a percentile ranking for each measure in order to 
prepare for public reporting.
    Response: In accordance with statutory requirements, all measures 
will be included on Hospital Compare for at least one year prior to the 
beginning of the performance period for which we propose to adopt them 
under the Hospital VBP program. The process of care measures and HCAHPS 
are updated quarterly, and facilities that submit data are provided a 
30-day preview of their data before public reporting occurs. The 
outcomes of care measures are updated annually, usually in July. The 
new outcomes data is included in the preview reports for this display 
period. As stated below, we will provide details on the information to 
be reported on Hospital Compare in future rulemaking. We will consider 
commenters' suggestion for quarterly preview reports on qualitynet.org 
before public reporting. However, we believe that providing robust 
quality information to the public as soon as possible is a desired 
outcome of quality reporting and performance scoring.
    Comment: One commenter noted that the requirement that measures be 
included on Hospital Compare appears to be a significant barrier to 
timely adoption of the HAI Action Plan metrics in the Hospital VBP 
program. Other commenters encouraged us to accelerate the adoption of 
those metrics for the Hospital IQR program, Hospital Compare, and NQF 
endorsement.
    Response: We agree that the requirement that measures be included 
on the Hospital Compare Web site for at least one year before the 
performance period for them can begin under the Hospital VBP program 
has the potential to limit the speed at which we can adopt measures for 
the program, however we intend to propose to adopt measures that drive 
quality improvements and improve patient safety, such as the prevention 
metrics included in the HHS Action Plan to Prevent HAIs, as quickly as 
possible within that constraint.
    Comment: Some commenters argued that CMS's data collection system 
does not adequately differentiate among conditions acquired in the 
hospital and those that are ``present on admission'' (POA) for purposes 
of scoring outcome measures. Commenters recommended that CMS allow 
hospitals to use POA claims indicators or consider other methods for 
outcome measure scoring, particularly since certain types of hospitals 
such as trauma centers or tertiary referral centers could be penalized 
on those measures because they receive a disproportionate share of 
transfers from other hospitals. Some commenters suggested that 
transferee and transferor hospitals should share in mortality rates for 
transferred patients.
    Response: We are currently using the POA indicator to calculate the 
proposed HAC and AHRQ patient safety composite measures, and we believe 
that the use of this indicator will better enable us to identify 
patient safety events, conditions and complications arising during 
hospital stays. We also

[[Page 26508]]

note that, under the specifications for the 30-day mortality measures, 
if the primary discharge diagnosis at the receiving hospital matches 
the primary discharge diagnosis at the transferring hospital, the 
patients are included in the transferring hospital's mortality measure 
calculations. We believe this approach encourages coordination between 
hospitals and their referral networks. Further, we believe that this 
approach promotes the best interests of the patient because it does not 
create an incentive for hospitals to transfer patients who are 
critically ill or at high risk of dying.
    Comment: Some commenters were concerned about the accuracy of 
claims-based quality measures. In particular, they questioned how 
claims-based quality measurements will be accurate given hospitals' 
technical and programming issues with the AHRQ measures, which are 
claims based rather than chart abstracted.
    Response: Both the AHRQ measures and their data source have been 
endorsed by NQF. We note that other quality initiatives, such as the 
Medicare End-Stage Renal Disease Quality Incentive Program, require 
reporting on claims-based measures. While they have certain 
limitations, claims-based measures provide important information on 
hospital quality of care. We also note that hospitals are not required 
to submit data for the AHRQ measures; rather, the calculations are 
derived from Medicare fee-for-service claims data. Thus, neither 
technical nor programming issues should arise. For the reasons 
discussed above, we are only finalizing the two composite AHRQ 
measures.
    Comment: Some commenters opposed our proposal to implement a 
subregulatory process for adding or retiring measures, calling on CMS 
to use full notice and comment rulemaking instead. A few commenters 
supported the proposed subregulatory process.
    Response: We appreciate the comments, and understand that 
stakeholder input is critical to ensuring that the Hospital VBP program 
and measure set improves the quality of care and patient safety. As 
stated in the Hospital Inpatient VBP proposed rule (76 FR 2458 through 
2459), we believe that we 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\
---------------------------------------------------------------------------

    \4\ See 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.
---------------------------------------------------------------------------

    For this reason, we believe that we should 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. Additionally, we believe that we should retire measures from 
the Hospital VBP program as quickly as possible to ensure that they do 
not detract from other measures that we believe will be more impactful 
in improving patient health. We believe that speed of implementation is 
a critical factor in the success and effectiveness of this program.
    However, we are aware of stakeholders' concerns about the proposed 
subregulatory process. We understand commenters' point that notice-and-
comment rulemaking is important to ensure that hospitals are aware of 
the applicable measures. In response to those comments, we will not 
finalize the proposed subregulatory process for adding or retiring 
measures. Instead, we have proposed in the FY 2012 IPPS/LTCH PPS 
proposed rule scheduled for publication on May 5, 2011 that we might 
choose to propose to simultaneously adopt one or more measures for both 
the Hospital IQR Program and the Hospital VBP program. We refer readers 
to that proposal for further information.
    Comment: Some commenters suggested that we consider adopting 
quality measures covering more conditions to ensure that hospitals 
improve the quality of care that they furnish to all patients, not just 
those diagnosed with conditions covered by current quality measures.
    Response: We thank commenters for the suggestion. The Affordable 
Care Act specifically names AMI, HF, PN, SCIP, HAIs and HCAHPS as 
initial topics to be included in the Hospital VBP program in FY 2013. 
We will consider other measures and conditions for inclusion in the 
Hospital VBP program for future years.
    Comment: Some commenters strongly opposed use of the IQI stroke 
mortality measure, arguing that it is not adjusted for stroke severity.
    Response: We thank commenters for their suggestion. The current 
methodology for this measure, including the risk adjustment methodology 
is NQF endorsed.
    Comment: A number of commenters asked how hospitals will be scored 
and payments will be adjusted when measure specifications change.
    Response: We understand that from time to time measure 
specifications require updating. We maintain the technical 
specifications by updating the 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. While many of these updates or 
changes do not impact the calculation of the measures, we are aware 
that substantive changes to the specifications for a measure may impact 
the score a hospital receives.
    Comment: Some commenters asked if measure adoption will expand at a 
rate that keeps pace with hospital resources. Other commenters 
expressed concern that measure reporting might burden hospitals, while 
others suggested that we consider how difficult measures are for 
hospitals to improve upon.
    Response: We are cognizant of the reporting burden on hospitals 
associated with the adoption of new measures under both the Hospital 
IQR program and the Hospital VBP program. In proposing to adopt new 
measures for the Hospital IQR program, which make them candidates for 
the Hospital VBP program, we have emphasized on many occasions that we 
take into consideration the burden that additional reporting will have 
on hospitals, and we seek, for that reason, to limit our proposals to 
adopt chart-abstracted measures. We also carefully consider whether the 
benefit that we believe will be realized from adopting additional 
measures (such as encouraging hospitals to improve their performance on 
those measures) will outweigh the burden associated with their 
collection.
    Comment: Some commenters asked if 30-day readmission rates will be 
included in the Hospital VBP program.
    Response: Measures of readmissions are statutorily excluded under 
section 1886(o)(2)(A) of the Act and therefore cannot be included in 
the Hospital VBP program.
    Comment: A commenter asked if measure scores will be based on all-
payer data or Medicare data only. Some commenters argued that the 
Hospital VBP program's measures should capture data for all patients, 
not Medicare patients only so that hospitals are ranked and 
incentivized according to their care for all patients, rather than for 
Medicare patients only.
    Response: Measures in the clinical process and patient experience 
domains are scored using all-patient data while measures in the outcome 
domain will be scored using Medicare claims data only. Although we 
generally agree that all-patient data would be a preferable

[[Page 26509]]

source of data for purposes of calculating all Hospital VBP measures, 
we currently do not have access to claims data submitted by hospitals 
to other payers.
    Comment: Some commenters suggested that we more forcefully endorse 
the NQF process, expressing concern that marginalizing the NQF 
endorsement process might discourage hundreds of hard working 
volunteers.
    Response: We work closely with the NQF on issues related to measure 
endorsement because that entity holds the contract under section 
1890(a) of the Act. However, we note that in the case of a specified 
area or medical topic determined appropriate by the Secretary for which 
there is no NQF-endorsed measure, section 1886(b)(3)(B)(viii)(IX)(bb) 
of the Act allows us to specify a measure that is not NQF-endorsed so 
long as due consideration has been given to measures that have been 
endorsed or adopted by a consensus organization identified by the 
Secretary.
    Comment: Several commenters suggested that we consider adopting a 
central line-associated blood stream infections measure, a surgical 
site infections measure, and/or the National Database of Nursing 
Quality Indicators for the Hospital VBP program.
    Response: We thank commenters for their input. We note that we have 
adopted a central line-associated blood stream infection measure 
(CLABSI) and surgical site infection measure (SSI) for the Hospital IQR 
program, and we anticipate proposing to adopt these measures for the 
Hospital VBP program in the future. The National Database of Nursing 
Quality Indicators (NDNQI) were previously considered for Hospital IQR 
program adoption (See 72 FR 47351), and we remain interested in these 
measures.
    Comment: Some commenters asked us to explain why the current 
requirement by CMS for NHSN reporting begins with January 2011 events 
for CLABSI and with January 2012 events for SSI.
    Response: In response to public comments on the FY 2011 IPPS/LTCH 
PPS proposed rule, we adopted one NHSN collected measure (the CLABSI 
measure) for the FY 2013 Hospital IQR payment determination (with 
reporting beginning with respect to January 2011 events) to allow 
hospitals to gain experience with the NHSN collection mechanism for one 
year before requiring hospitals to begin reporting a second measure 
(SSI) using that mechanism (75 FR 50202).
    Comment: Some commenters argued that the FY 2013 measures do not 
reflect nurses' contributions to patient care.
    Response: We disagree. Many of the process of care measures reflect 
the contributions of a broad range of healthcare professionals, 
including nurses. Furthermore, a number of measures rely heavily on 
nursing input and documentation. Additionally, one of the eight HCAHPS 
dimensions focuses exclusively on nurses' role in communicating with 
patients regarding their care.
    Comment: One commenter suggested that we post measure information 
on Hospital Compare for 2 years prior to adopting them in the Hospital 
VBP program.
    Response: We thank the commenter for the input. Although we 
acknowledge that section 1886(o)(2)(C)(i) provides, in part, that 
measures must be included on the Hospital Compare Web site for at least 
one year prior to the performance period, we believe that a one year 
period is sufficient to ensure that hospitals, Medicare beneficiaries 
and other stakeholders are fully aware of and familiar with the 
measures before they are added to the Hospital VBP program. We also 
believe that any further delay would unnecessarily postpone the 
adoption of important measures for the Hospital VBP program.
    Comment: One commenter noted that care coordination measures are 
not included in the Hospital VBP measure set.
    Response: We will consider this comment as we seek to expand the 
Hospital VBP measure set in the future.
    Comment: One commenter called on us not to use the Krumholtz 
methodology for mortality measures. The commenter noted that this 
methodology has only been applied in very narrow ranges of diagnoses; 
may not be useful for comparing mortality rates; has weak explanatory 
power; omits variables that should be considered; and would be 
difficult if not impossible to generalize.
    Response: We disagree. The risk-standardized mortality rates for 
the three proposed mortality measures are derived from administrative 
data for Medicare patients with a principal discharge diagnosis of AMI, 
HF, and PN from all acute care and critical access hospitals in the 
nation. The model used for calculation includes several variables and 
has a relatively high discrimination rate. As a result we believe this 
methodology is appropriate to use. Additionally, this methodology falls 
within the scope of the NQF-endorsement for the three proposed 
mortality measures.
    Comment: One commenter asked us to clarify whether hospital data 
reported on Hospital Compare that are also collected by the Joint 
Commission will continue to be included on Hospital Compare.
    Response: Yes. Many of the AMI, Heart Failure, Pneumonia and SCIP 
measures reported to CMS for Hospital IQR and publicly reported on 
Hospital Compare are also collected and utilized by the Joint 
Commission. In addition, hospitals can voluntarily choose to allow CMS 
to publicly report the Joint Commission's children's asthma care 
measures, which are not part of Hospital IQR, on Hospital Compare. We 
will continue to publicly report all Hospital IQR measures and other 
quality information on Hospital Compare.
    Comment: One commenter questioned whether the proposed clinical 
process of care measures have been tested in older patients and women 
to assure applicability to Medicare's patient subpopulations.
    Response: The clinical process of care measures proposed for the 
Hospital VBP program have been tested and used in all patients 18 years 
and older which includes older patients and women if they meet criteria 
for inclusion in the measure.
    Comment: Some commenters recommended that CMS and outside experts 
study the measures' actual impact on patients and caregivers. 
Commenters also expressed concern about possible unintended 
consequences for patient care due to measure design, such as some 
hospitals refusing to admit high-risk patients in an effort to improve 
their Total Performance Score.
    Response: We thank commenters for their input. We intend to monitor 
the initial impacts of the Hospital VBP program, including its impacts 
on costs, quality, outcomes, and patient experiences with care. We 
believe the Hospital VBP program represents a significant next step in 
aligning payment with the quality of care delivered to beneficiaries. 
We firmly believe that these efforts will increase the quality of care 
provided, resulting in improved health outcomes. However, we will 
monitor and evaluate the impact of the Hospital VBP program on access 
to and quality of care, including monitoring any unintended 
consequences.
    Comment: One commenter stated that the proposal to use electronic 
submission for measures in future years was misaligned with one of the 
potential future measures. The measure, ``median time from admit 
decision time to time of departure from the emergency department (ED) 
for ED patients admitted to inpatient status'' differs from the 
specifications put forth by

[[Page 26510]]

HITSP (Health Information Technology Standards) which specifies the 
measure as, Admit Decision Time to ED Departure Time. The difference is 
that the former does not allow for the use of Admit Orders Date (or 
Admit Orders Time) in the measures specification while the HITSP 
specifications do allow the use of this data.
    Response: We agree that the measure specifications for ``median 
time from admit decision time to time of departure from the emergency 
department (ED) for ED patients admitted to inpatient status'' require 
manual chart abstraction, and is specified slightly different than 
electronic health record version of the measure. This is because of the 
availability of the data. When abstracting data manually, a human 
abstractor uses specific guidelines for abstraction. Admit order date/
time are not included in the chart abstracted version as the intent of 
the measure is to calculate throughput time (that is, how long the 
patient is in the ED) which is calculated from admit decision to 
departure from the Emergency Department. The admit decision time is 
generally found in a note written in the chart, and therefore, a human 
abstractor can interpret that data element per the guidelines for 
abstractions. In contrast, admit date/time are used in the electronic 
specifications as the two fields are readily available in the 
electronic health record (EHR), and there is no human interpretation. 
At this time, data from a progress note is not considered a discreet 
data element and therefore cannot be used for EHR abstraction.
    After consideration of public comments, we are finalizing our 
proposed definition of ``topped out'' for purposes of measure selection 
under the Hospital VBP program. We will use this definition to inform 
our measure proposals for future Hospital VBP program years and will 
use the most recently available data at the time to conduct our 
analysis. Additionally, we are finalizing our proposal to adopt 12 of 
the 17 proposed clinical process of care measures for the FY 2013 
Hospital VBP program, but for the reasons discussed above, are not 
finalizing our proposal to adopt the following measures: PN-2, PN-7, 
AMI-2, HF-2 and HF-3.
    Table 2 lists the 13 measures we are finalizing for the FY 2013 
Hospital VBP measure set.

        Table 2--Final Measures for FY 2013 Hospital VBP Program
------------------------------------------------------------------------
            Measure ID                       Measure description
------------------------------------------------------------------------
                    Clinical Process of Care Measures
------------------------------------------------------------------------
                       Acute myocardial infarction
------------------------------------------------------------------------
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.
------------------------------------------------------------------------
                                Pneumonia
------------------------------------------------------------------------
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.
------------------------------------------------------------------------
                    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.
------------------------------------------------------------------------
                   Patient Experience of Care Measures
------------------------------------------------------------------------
HCAHPS............................  Hospital Consumer Assessment of
                                     Healthcare Providers and Systems
                                     Survey.\5\
------------------------------------------------------------------------

    With respect to the FY 2014 Hospital VBP measure set, we are 
finalizing our proposal to adopt the three 30-day mortality claims-
based measures, MORT-30-AMI, MORT-30-HF, and MORT-30-PN, as well as the 
8 proposed HAC measures. In light of the public comments we received 
regarding the proposed AHRQ measures and as discussed above, we are 
only finalizing the 2 composite measures: Complication/patient safety 
for selected indicators (composite) and Mortality for selected medical 
conditions (composite). The measures that we are finalizing in this 
final rule for the FY 2014 Hospital VBP Program are listed in Table 3 
below.
---------------------------------------------------------------------------

    \5\ Proposed dimensions of the HCAHPS survey for use in the FY 
2013 Hospital VBP program are: Communication with Nurses, 
Communication with Doctors, Responsiveness of Hospital Staff, Pain 
Management, Communication about Medicines, Cleanliness and Quietness 
of Hospital Environment, Discharge Information and Overall Rating of 
Hospital.

[[Page 26511]]



Table 3--Finalized Outcome Measures for the FY 2014 Hospital VBP Program
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Mortality Measures (Medicare Patients):
     Acute Myocardial Infarction (AMI) 30-day mortality rate..
     Heart Failure (HF) 30-day mortality rate.................
     Pneumonia (PN) 30-day mortality rate.....................
AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators
 (IQIs) Composite Measures:
     Complication/patient safety for selected indicators
     (composite)......................................................
     Mortality for selected medical conditions (composite)....
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 Infection...................
     Catheter-Associated Urinary Tract Infection (UTI)........
     Manifestations of Poor Glycemic Control..................
------------------------------------------------------------------------

    As noted above, we have proposed in the FY 2012 IPPS/LTCH PPS 
proposed rule scheduled for publication on May 5, 2011 to adopt an 
additional measure, Medicare spending per beneficiary, for the FY 2014 
Hospital VBP program. We also intend to propose to adopt additional 
measures for the FY 2014 Hospital VBP program in the CY 2012 OPPS 
proposed rule.

E. Performance Standards

    To determine what the 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 had on each of these 
measures by virtue of the Hospital IQR program. Because we proposed to 
adopt a performance period that was less than a full year for FY 2013, 
we were sensitive to the fact that hospital performance on the proposed 
measures could 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 time period in the 
applicable 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 stated 
our belief that selecting a three-quarter baseline period from July 1, 
2009 to March 31, 2010 will enable us to achieve this goal. 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.
    We proposed to set the achievement performance standard 
(achievement threshold) for each proposed FY 2013 Hospital VBP measure 
at the median of hospital performance (50th percentile) during the 
baseline period of July 1, 2009 through March 31, 2010. As proposed in 
the Hospital Inpatient VBP proposed rule (76 FR 2463 through 2464), 
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 and will reward hospitals for meritorious performance on 
quality measures. We also proposed to set the improvement performance 
standard (improvement threshold) for each measure at each specific 
hospital's performance on the measure during the baseline period of 
July 1, 2009 through March 31, 2010. We believe that these proposed 
improvement performance standards ensure that hospitals will be 
adequately incentivized to improve.
    We proposed to set the achievement performance standard 
(achievement threshold) for each of the proposed FY 2014 Hospital VBP 
mortality measures at the median of hospital performance (50th 
percentile) during the baseline period. We proposed to set the 
improvement performance standard (improvement threshold) for each 
mortality measure at each specific hospital's performance on each 
measure during the baseline period of July 1, 2008 to December 31, 
2009. The comments we received on these proposals and our responses are 
set forth below.
    Comment: A number of commenters suggested that we publish baseline 
achievement thresholds and benchmarks for clinical process measures and 
HCAHPS dimensions on Hospital Compare.
    Response: The finalized achievement thresholds and benchmarks that 
apply to the FY 2013 Hospital VBP program are provided in Table 4 of 
this final rule. We will consider the commenters suggestion to publish 
baseline achievement thresholds and benchmarks on Hospital Compare in 
the future.
    Comment: One commenter requested that CMS clarify whether hospitals 
lacking the minimum number of patients or measures would be included in 
baseline period calculations of thresholds and benchmarks.
    Response: The achievement thresholds and benchmarks will be 
calculated using data from a baseline period comparable in length to 
the performance period. For this reason, we believe that we should also 
use the same minimums for purposes of those calculations.
    Comment: One commenter suggested that we compare performance among 
similar hospitals rather than against

[[Page 26512]]

national data. Other commenters asked if CMS was going to adjust the 
baseline period data based on any factors such as geographic region.
    Response: We believe that achievement thresholds and benchmarks 
based on national data provide balanced, appropriate standards of high 
quality care for hospitals to work towards under the Hospital VBP 
program. Some groups of hospitals may perform better or worse than 
other hospitals on certain measures, but we do not believe it would 
appropriate to raise or lower the performance standards based on such 
observations. For example, we do not wish to lower the performance 
standards for a hospital simply because average performance in its 
local region is subpar compared to national performance. Similarly, we 
do not wish to raise or lower the performance standards for large 
hospitals, teaching hospitals, or others based on any observations that 
classes of hospitals differed in their average performance on 
individual measures. We note that consumers will be able to compare 
geographically and demographically similar hospitals' performance on 
measures as they currently do on the Hospital Compare Web site.
    Comment: One commenter asked us to clarify the baseline periods for 
Hospital VBP program years after FY 2013.
    Response: We intend to propose all future baseline periods in 
future rulemaking and specifically, intend to propose the FY 2014 
Hospital VBP payment determination baseline period in the CY 2012 OPPS 
rule.
    Comment: One commenter asked how CMS will address hospital mergers 
that occur during the performance period.
    Response: The issue of how to address the calculation of the total 
performance score in the context of hospital mergers will be the 
subject of future rulemaking.
    After considering the public comments, we are finalizing the 
proposed definitions of the achievement performance standard 
(achievement threshold) and the improvement performance standard 
(improvement threshold) for the FY 2013 Hospital VBP program as 
displayed below in Table 4. Because our process for validating the 
proposed baseline period of data was not yet complete at the time we 
issued the proposed rule, we were unable to provide the precise 
achievement threshold values; instead we provided example achievement 
performance standards. We also stated that these values would be 
specified in the final rule (76 FR 2464), and they are shown below.

 Table 4--Achievement Thresholds That Apply to the FY 2013 Hospital VBP
                            Program Measures
------------------------------------------------------------------------
                                                            Performance
                                                             standard
           Measure ID              Measure description     (achievement
                                                            threshold)
------------------------------------------------------------------------
                    Clinical Process of Care Measures
------------------------------------------------------------------------
AMI-7a.........................  Fibrinolytic Therapy             0.6548
                                  Received Within 30
                                  Minutes of Hospital
                                  Arrival.
AMI-8a.........................  Primary PCI Received             0.9186
                                  Within 90 Minutes of
                                  Hospital Arrival.
HF-1...........................  Discharge Instructions.          0.9077
PN-3b..........................  Blood Cultures                   0.9643
                                  Performed in the
                                  Emergency Department
                                  Prior to Initial
                                  Antibiotic Received in
                                  Hospital.
PN-6...........................  Initial Antibiotic               0.9277
                                  Selection for CAP in
                                  Immunocompetent
                                  Patient.
SCIP-Inf-1.....................  Prophylactic Antibiotic          0.9735
                                  Received Within One
                                  Hour Prior to Surgical
                                  Incision.
SCIP-Inf-2.....................  Prophylactic Antibiotic          0.9766
                                  Selection for Surgical
                                  Patients.
SCIP-Inf-3.....................  Prophylactic                     0.9507
                                  Antibiotics
                                  Discontinued Within 24
                                  Hours After Surgery
                                  End Time.
SCIP-Inf-4.....................  Cardiac Surgery                  0.9428
                                  Patients with
                                  Controlled 6AM
                                  Postoperative Serum
                                  Glucose.
SCIP-VTE-1.....................  Surgery Patients with            0.9500
                                  Recommended Venous
                                  Thromboembolism
                                  Prophylaxis Ordered.
SCIP-VTE-2.....................  Surgery Patients Who             0.9307
                                  Received Appropriate
                                  Venous Thromboembolism
                                  Prophylaxis Within 24
                                  Hours Prior to Surgery
                                  to 24 Hours After
                                  Surgery.
SCIP-Card-2....................  Surgery Patients on a            0.9399
                                  Beta Blocker Prior to
                                  Arrival That Received
                                  a Beta Blocker During
                                  the Perioperative
                                  Period.
------------------------------------------------------------------------
                   Patient Experience of Care Measures
------------------------------------------------------------------------
HCAHPS.........................  Communication with               75.18%
                                  Nurses.
                                 Communication with               79.42%
                                  Doctors.
                                 Responsiveness of                61.82%
                                  Hospital Staff.
                                 Pain Management........          68.75%
                                 Communication About              59.28%
                                  Medicines.
                                 Cleanliness and                  62.80%
                                  Quietness of Hospital
                                  Environment.
                                 Discharge Information..          81.93%
                                 Overall Rating of                66.02%
                                  Hospital.
------------------------------------------------------------------------

    We are also finalizing the achievement thresholds for the three 
mortality measures, (displayed as survival rates) in Table 5 below 
based on a 12-month baseline period from July 1, 2009 to June 30, 2010:

[[Page 26513]]



  Table 5--Achievement Thresholds for the FY 2014 Hospital VBP program
        Mortality Outcome Measures (Displayed as Survival Rates)
------------------------------------------------------------------------
                                                            Performance
                                                             standard
           Measure ID              Measure description     (achievement
                                                            threshold)
------------------------------------------------------------------------
                       Mortality Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI....................  Acute Myocardial               84.8082%
                                  Infarction (AMI) 30-
                                  Day Mortality Rate.
MORT-30-HF.....................  Heart Failure (HF) 30-         88.6109%
                                  Day Mortality Rate.
MORT-30 PN.....................  Pneumonia (PN) 30-Day          88.1795%
                                  Mortality Rate.
------------------------------------------------------------------------

F. Methodology for Calculating the Total Performance Score

1. Statutory Provisions
    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 5 requirements related 
to the scoring methodology developed by the 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 Total 
Performance Scores receiving the largest value-based incentive 
payments.
    Section 1886(o)(5)(B)(ii) provides that, under the methodology, the 
hospital Total Performance Score must be determined using the higher of 
the applicable hospital's 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
    As discussed in the Hospital Inpatient VBP Program proposed rule, 
in addition to statutory requirements, we also considered several 
additional factors when developing the proposed performance scoring 
methodology for the Hospital VBP program. First, we stated our belief 
that it is important that the performance scoring methodology is 
straightforward 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 stated our belief that the scoring methodologies for all 
Medicare Value-Based Purchasing programs, including (but not limited 
to) the End Stage Renal Disease Quality Incentive Program 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 stated our belief 
that differences in performance scores must reflect true differences in 
performance. In order to ensure this in the proposed Hospital VBP 
Program, we assessed the quantitative characteristics of the measures 
we are proposing to use to calculate the Total 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 
stated that we must appropriately measure both quality achievement and 
improvement in the Hospital VBP program. Section 1886(o)(5)(B)(ii) of 
the Act specifies that performance scores under the Hospital VBP 
program be calculated utilizing the higher of achievement and 
improvement scores for each measure; 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 stated that we wished to eliminate unintended 
consequences for rewarding inappropriate hospital behavior and outcomes 
to patients in our performance scoring methodology. Sixth, we stated 
that we wished 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.
    The methodology proposed in the Hospital Inpatient VBP Program 
proposed rule for calculating the improvement score relies on a 
comparison of the hospital's performance during the performance period 
against its performance during a baseline period rather than a 
comparison of the hospital's performance during a particular year 
against its performance during a previous year (as was outlined in the 
2007 Report to Congress).
    We stated that we planned 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.
    In the Hospital Inpatient VBP Program proposed rule, we solicited 
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 welcomed suggestions on improving the simplicity of the Hospital 
VBP program performance score methodology and its alignment with other 
CMS quality initiatives.

[[Page 26514]]

3. Background
    In November 2007, CMS published 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.
---------------------------------------------------------------------------

    \6\ The report may be found at http://www.cms.gov/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUBMITTED2007.pdf.
---------------------------------------------------------------------------

    The Performance Assessment Model provides a methodology for 
evaluating a hospital's performance on each 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 the Hospital VBP 
program by awarding points for showing improvement on 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 
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 the 
Hospital VBP incentive payment earned using an exchange function, which 
aligns payments with desired policy goals.
4. FY 2013 Hospital VBP Program Scoring Methodology
    As stated in the Hospital Inpatient VBP Program proposed rule, we 
believe that the Performance Assessment Model presented and analyzed in 
the 2007 Report to Congress provides a useful foundation for developing 
the 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 discussed in this Final 
Rule).
    After carefully reviewing and evaluating a number of potential 
performance scoring methodologies for the Hospital VBP program, we 
proposed to use a Three-Domain Performance Scoring Model, although we 
proposed that only two domains would receive weight in FY 2013. This 
methodology is very similar to the Performance Assessment Model; 
however, it incorporates an outcome measure domain in addition to the 
clinical process of care and patient experience of care domains.
    While we did not propose to adopt any outcome measures for the FY 
2013 Hospital VBP program, we proposed to adopt these measures as part 
of an outcome measures domain for FY 2014. The proposed Three-Domain 
Performance Scoring Model 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.
a. Setting Performance Benchmarks and Thresholds
    As stated above, section 1886(o)(5)(B)(ii) of the Act requires that 
under the Hospital VBP program 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.
    In the Hospital Inpatient VBP Program proposed rule, we proposed 
that hospitals will 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 proposed 
that hospitals will 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 proposed to establish the benchmarks and 
achievement thresholds for the FY 2013 Hospital VBP program using 
national data from a three-quarter baseline period of July 1, 2009 
through March 31, 2010.
    To define a high level of hospital performance on a given measure, 
we proposed to set the benchmark at the mean of the top decile of 
hospital scores on the clinical process of care, and outcome measures 
during the baseline period. For the patient experience of care 
measures, we proposed to set the benchmark at the 95th percentile of 
hospital performance during the baseline period. We stated that this 
would ensure that the benchmark represents demonstrably high but 
achievable standards of excellence; in other words, the benchmark will 
reflect observed scores for the highest-performing hospitals on a given 
measure.
    We proposed 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 achievement threshold to 
earn achievement points.
    Comment: We received many comments stating that the proposed 
benchmarks were too high. Some commenters stated that this was 
evidenced by the fact that for many of the proposed measures, 
performance at the benchmark would require hospitals to achieve 100 
percent success on the measure. In addition to stating that this level 
of performance could be too difficult for some hospitals to achieve, 
some commented that this would serve as an inappropriate benchmark in 
light of the fact that the measures do not incorporate all clinically 
relevant exclusion criteria based on every patient's particular 
situation. One commenter supported setting the benchmark at the 80th 
percentile in the

[[Page 26515]]

baseline period for the patient experience of care domain to ensure 
that every hospital has a chance of exceeding the benchmark.
    Response: As we stated in the Hospital Inpatient VBP program 
proposed rule, the benchmark is intended to represent an empirically-
demonstrated level of excellent performance during the baseline period 
(76 FR 2471), and we believe that this standard represents achievable 
excellence for all hospitals during the performance period. We 
recognize that some of the proposed clinical process of care measures 
do not meet our criteria for topped-out status but still have a 
benchmark of 100 percent success.
    We consider a benchmark to be an empirically-observed level of 
excellent performance to which we believe hospitals generally should 
aspire. Using the proposed definition of a benchmark (mean value for 
the top 10 percent of hospitals during the baseline period), typically 
only about 5 percent of all hospitals will be observed to have achieved 
the benchmark level for an individual measure during the baseline 
period. However, any number of hospitals could score at or above the 
benchmark during the performance period, and under the proposed 
performance scoring methodology, such hospitals would receive the full 
10 points on the measure. A benchmark level of 100 percent is a special 
case in which at least 10 percent of hospitals achieved a 100 percent 
success rate on the measure during the baseline period. When a 
benchmark for a measure is 100 percent, at least half of all reporting 
hospitals will receive at least some achievement points on the measure 
(assuming no general degradation of performance among hospitals), which 
is the same as every other measure. Arbitrarily setting benchmark 
levels (for example, at 80th percentile) would undermine its 
empirically-based definition, as would, for example, arbitrarily 
setting the benchmark at 100 percent for every measure.
    As stated above, when a benchmark is 100 percent, at least 10 
percent of hospitals would have to have achieved 100 percent on the 
measure during the baseline period; this suggests that achieving 100 
percent success on a measure is not prohibitively difficult as a 
portion of hospitals will have actually achieved that standard. In rare 
instances, a hospital might not provide a process covered by a clinical 
process of care measure because none of those measures currently allow 
for blanket discretionary exclusions that would enable a hospital to 
exclude a case based on any conceivable set of circumstances. As a 
result, a measure calculation might capture a rare case that arguably 
could have been excluded, such as a case where the patient was allergic 
to all indicated drugs, or the patient refused services and/or asked to 
be discharged against medical advice. As new information becomes 
available concerning possible unintended consequences of measures, 
their specifications can be reviewed and revised as necessary, 
including the addition of supplemental exclusion criteria. This process 
is ongoing and, we believe, is a better way to deal with rare cases 
instead of setting a benchmark at an indiscriminate, low value such as 
the 80th percentile.
    All measures have limitations and it is therefore possible that a 
hospital, in the unfortunate but rare instance in which it provides 
what it believes is the best quality of care, will fail to achieve the 
benchmark. It is partly for this reason that we proposed to set the 
achievement performance standard for each measure at the achievement 
threshold rather than the benchmark. We also emphasize that a 
hospital's value-based incentive payment is based on its Total 
Performance Score, not on performance at the benchmark for every 
measure. Our analysis indicates that small differences in points on a 
single measure caused by missing the benchmark have little impact on 
the distribution of incentive payments and rank correlation of 
hospitals.
    Comment: One commenter argued that high-performing hospitals ``who 
already beat national benchmarks'' have incentives to perform poorly 
``in the short term'' so that they can then win improvement points and 
receive higher payments.
    Response: We assume that the commenter is suggesting a scenario in 
which a high-performing hospital might attempt to intentionally score 
lower on one or more measures during the baseline period in order to 
score improvement points during the performance period. First, we 
expect all Medicare hospitals to provide high-quality care to their 
patients regardless of whether they are included in the Hospital VBP 
program or not. Furthermore, we disagree that high-achieving hospitals 
would have an incentive to lower their performance in order to win 
improvement points in the Hospital VBP program. We note that under the 
proposed Three-Domain Scoring Methodology, the maximum number of 
achievement points possible on a given measure is higher (10 points) 
for achieving the benchmark, than the maximum number of improvement 
points possible (9 points). It is difficult to envision a scenario in 
which a high-performing hospital would earn more overall points on a 
measure (that is, the higher of achievement and improvement points) by 
intentionally lowering its performance during the baseline period and 
increasing performance during the performance period versus simply 
maintaining high performance during the baseline period and seeking to 
maintain or improve on that performance during the performance period. 
However, we plan to closely monitor and evaluate the impact of the 
Hospital VBP program on the quality of care provided to Medicare 
beneficiaries.
    After consideration of the public comments, we are finalizing as 
proposed the definition of the benchmark as the mean of the top decile 
of hospital performance during the baseline period for the clinical 
process of care and outcome measures. In response to numerous public 
comments (further discussed below) requesting greater uniformity 
between the scoring of clinical process of care measures, outcome 
measures, and HCAHPS dimensions, we are also finalizing the definition 
of the benchmark as the mean of the top decile of performance during 
the baseline period for the patient experience of care domain.
    The finalized benchmarks for the clinical process of care and 
patient experience of care domains for the FY 2013 Hospital VBP Program 
are provided below in Table 6. The finalized benchmarks for the three 
30-day mortality outcome measures for the FY 2014 Hospital VBP Program 
are provided below in Table 7.

   Table 6--Benchmarks That Apply to the FY 2013 Hospital VBP Program
                                Measures
------------------------------------------------------------------------
           Measure ID              Measure description       Benchmark
------------------------------------------------------------------------
                    Clinical Process of Care Measures
------------------------------------------------------------------------
AMI-7a.........................  Fibrinolytic Therapy             0.9191
                                  Received Within 30
                                  Minutes of Hospital
                                  Arrival.
AMI-8a.........................  Primary PCI Received                1.0
                                  Within 90 Minutes of
                                  Hospital Arrival.

[[Page 26516]]

 
HF-1...........................  Discharge Instructions.             1.0
PN-3b..........................  Blood Cultures                      1.0
                                  Performed in the
                                  Emergency Department
                                  Prior to Initial
                                  Antibiotic Received in
                                  Hospital.
PN-6...........................  Initial Antibiotic               0.9958
                                  Selection for CAP in
                                  Immunocompetent
                                  Patient.
SCIP-Inf-1.....................  Prophylactic Antibiotic          0.9998
                                  Received Within One
                                  Hour Prior to Surgical
                                  Incision.
SCIP-Inf-2.....................  Prophylactic Antibiotic             1.0
                                  Selection for Surgical
                                  Patients.
SCIP-Inf-3.....................  Prophylactic                     0.9968
                                  Antibiotics
                                  Discontinued Within 24
                                  Hours After Surgery
                                  End Time.
SCIP-Inf-4.....................  Cardiac Surgery                  0.9963
                                  Patients with
                                  Controlled 6AM
                                  Postoperative Serum
                                  Glucose.
SCIP-VTE-1.....................  Surgery Patients with               1.0
                                  Recommended Venous
                                  Thromboembolism
                                  Prophylaxis Ordered.
SCIP-VTE-2.....................  Surgery Patients Who             0.9985
                                  Received Appropriate
                                  Venous Thromboembolism
                                  Prophylaxis Within 24
                                  Hours Prior to Surgery
                                  to 24 Hours After
                                  Surgery.
SCIP-Card-2....................  Surgery Patients on a               1.0
                                  Beta Blocker Prior to
                                  Arrival That Received
                                  a Beta Blocker During
                                  the Perioperative
                                  Period.
------------------------------------------------------------------------
HCAHPS.........................  Communication With               84.70%
                                  Nurses.
                                 Communication With               88.95%
                                  Doctors.
                                 Responsiveness of                77.69%
                                  Hospital Staff.
                                 Pain Management........          77.90%
                                 Communication About              70.42%
                                  Medicines.
                                 Cleanliness and                  77.64%
                                  Quietness of Hospital
                                  Environment.
                                 Discharge Information..          89.09%
                                 Overall Rating of                82.52%
                                  Hospital.
------------------------------------------------------------------------


Table 7--Final Benchmarks for the FY 2014 Hospital VBP Program Mortality
             Outcome Measures (Displayed as Survival Rates)
------------------------------------------------------------------------
           Measure ID              Measure description       Benchmark
------------------------------------------------------------------------
                       Mortality Outcome Measures
------------------------------------------------------------------------
MORT-30-AMI....................  Acute Myocardial               86.9098%
                                  Infarction (AMI) 30-
                                  Day Mortality Rate.
MORT-30-HF.....................  Heart Failure (HF) 30-         90.4861%
                                  Day Mortality Rate.
MORT-30 PN.....................  Pneumonia (PN) 30-Day          90.2563%
                                  Mortality Rate.
------------------------------------------------------------------------

b. Calculating Achievement, Improvement Points, and Consistency Points
    We proposed a scoring methodology that would assign an achievement 
and improvement score to each hospital for each of the clinical process 
of care and outcome measures that apply to the hospital, and for each 
HCAHPS dimension. We proposed that a hospital will earn 0-10 points for 
achievement based on where its performance for the measure fell 
relative to the achievement threshold and the benchmark.
    We proposed 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 scoring methodology we proposed to implement for HCAHPS 
includes achievement, improvement, and consistency points. We proposed 
that for the FY 2013 Hospital VBP program hospitals may earn from 0-20 
consistency points based on the lowest of its 8 HCAHPS dimension 
scores.
    We refer readers to the Hospital Inpatient VBP Program proposed 
rule (76 FR 2470-2487) for the details of the proposed scoring 
methodologies and examples of how hospital total performance scores are 
calculated under the Three-Domain Performance Scoring Model.
    Our responses to public comments are provided below.
    Comment: One commenter asked us to outline the scoring model for 
outcome measures before proposing their use.
    Response: As detailed in the Hospital Inpatient VBP Program 
proposed rule (76 FR 2466), we proposed that the outcome domain would 
be scored using the same methodology that we proposed to use to score 
the clinical process of care domain. That methodology is finalized in 
this final rule.
    Comment: We received numerous comments asking CMS to more closely 
align the scoring methodologies and formulas used to calculate points 
in the clinical process of care and patient experience of care domains. 
Commenters specifically suggested that we use percentages rather than 
percentiles in the HCAHPS scoring methodology and questioned why we 
chose different methodologies to calculate the benchmarks in the 
clinical process of care and patient experience of care domains. These 
commenters suggested that the patient experience of care scoring model 
laid out in the proposed rule was too complex and differed too greatly 
from the clinical process of care scoring model. Commenters also 
suggested that CMS create greater uniformity in Hospital VBP scoring 
formulas across the domains, including the formulation of the 
benchmarks.
    Response: In the initial analyses of HCAHPS data for the 2007 
Report to Congress, which was based on about 500 hospitals and three 
quarters of HCAHPS results, we found that a few small hospitals 
achieved much higher HCAHPS scores than most. Thus, a non-percentile 
approach for HCAHPS would have led to a skewed distribution of 
achievement points (most clustered at the low end and few high scores). 
At the time of the 2007 Report to Congress, the percentile approach did 
a better job of spreading out the achievement points.

[[Page 26517]]

    When we re-examined this issue in response to comments to the 
Hospital Inpatient VBP Program proposed rule, we found that our current 
data, which is based upon over 3,000 hospitals with several years of 
experience using HCAHPS, show that the distribution of scores has 
changed over time and that there is no longer a skewed distribution of 
achievement points using a non-percentile approach.
    Therefore, we will abandon the use of percentiles for calculating 
the benchmark in HCAHPS in Hospital VBP and instead will finalize the 
use of percentages of top-box scores in our HCAHPS calculations. As 
stated below, we believe that this change will both simplify the 
calculation of HCAHPS scores and will make HCAHPS scoring more 
comparable to that of the clinical process of care and outcome measures 
in the Hospital VBP program.
    In response to numerous comments received, we are finalizing the 
definition of the benchmark for each measure in the patient experience 
of care domain as the mean of the top decile of hospital performance on 
the measure (for purposes of the HCAHPS measure, this would be each 
HCAHPS dimension) during the baseline period. We believe this policy 
results in more uniform scoring methodologies across domains and 
appropriately reflects our decision to abandon the use of percentiles 
in the patient experience of care domain. We have made technical 
changes to the formulas used to calculate achievement and improvement 
points reflecting these finalized policies below.
    As shown in Table 8, for each of the 8 HCAHPS dimensions we are 
finalizing for the FY 2013 Hospital VBP program, scores will be based 
on the publicly-reported proportions of best category (``top-box'') 
responses. (As noted above, top-box responses, as publicly reported on 
the Hospital Compare Web site, are the most positive responses to 
HCAHPS survey questions and are adjusted for patient-mix and survey 
mode). Please note that the ``Cleanliness and Quietness'' dimension is 
the average of the publicly reported stand-alone ``Cleanliness'' and 
``Quietness'' ratings.

                      Table 8--Eight HCAHPS Dimensions for the FY 2013 Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
    Dimension (composite or stand-alone item)                     Constituent HCAHPS survey items
----------------------------------------------------------------------------------------------------------------
1. Communication with Nurses (% ``Always'').....  Nurse--Courtesy/Respect.
                                                  Nurse--Listen.
                                                  Nurse--Explain.
2. Communication with Doctors (% ``Always'')....  Doctor--Courtesy/Respect.
                                                  Doctor--Listen.
                                                  Doctor--Explain.
3. Responsiveness of hospital staff (%            Bathroom Help.
 ``Always'').                                     Call Button.
4. Pain management (% ``Always'')...............  Pain Control.
                                                  Help with Pain.
5. Communication about Medicines (% ``Always'').  New Medicine--Reason.
                                                  New Medicine--Side Effects.
6. Hospital Cleanliness & Quietness (%            Cleanliness and Quietness.
 ``Always'').                                     Discharge--Help.
    I. Discharge Information (% ``Yes'')........
7. Overall rating (% ``9 or 10'')...............  Discharge--Systems.
8. Overall Rating of Hospital (% ``9 or 10'')...  Overall Rating.
----------------------------------------------------------------------------------------------------------------

    Comment: Some commenters recommended that HCAHPS be excluded from 
the Hospital VBP program until an examination and public vetting of the 
scoring methodology takes place.
    Response: The scoring methodology proposed for HCAHPS was part of 
the original Report to Congress in 2007 and was subject to stakeholder 
input through multiple listening sessions. The final methodology 
described in this final rule is more similar to the clinical process of 
care scoring methodology since it now uses percentages not percentiles. 
The notice and comment rulemaking process for this rule has allowed the 
public to vet CMS' proposals. In response to public comments, CMS is 
making an additional change to the HCAHPS scoring methodology (this 
change is discussed below).
    Comment: Many commenters opposed our proposal to use consistency 
points in the patient experience of care domain. Others suggested that 
we consider using consistency points in the clinical process of care 
domain.
    Response: For reasons detailed in the 2007 Report to Congress and 
the Hospital Inpatient VBP Program proposed rule (76 FR 2472), we 
believe that consistency points recognize and reward consistent 
achievement across HCAHPS dimensions. By offering hospitals additional 
incentives to achieve across all HCAHPS dimensions, consistency points 
promote wider systems changes within hospitals to improve quality. We 
will consider developing consistency points for the clinical process of 
care domain in the future. However, we note that applying consistency 
points in that domain would be methodologically challenging. All 
hospitals must report all dimensions of the HCAHPS survey, and for that 
reason, all hospitals will earn scores on all dimensions on which we 
can use to fairly reward consistency. Applying consistency points to 
the clinical process of care domain when different numbers of measures 
might apply to different hospitals may result in unfair distributions 
of consistency points. We welcome input on an appropriate methodology 
for clinical process of care consistency points.
    Comment: A number of commenters suggested technical changes to the 
formulas proposed to be used to calculate achievement and improvement 
points. In suggesting these technical changes, commenters pointed out 
that under the proposed formulas for clinical process of care and 
outcome measure scoring, a hospital with a score equal to the 
achievement threshold would receive a score of .5, which rounds to 1, 
while a hospital with a score equal to the benchmark would receive a 
score of 9.5, which rounds to 10. Commenters pointed out that this 
formula effectively creates a scale of 0.5 to 9.5 instead of a scale 
from 1 to 10. These commenters urged CMS to modify the formula so that 
the scale ``starts'' at 1 instead of 0.5, and urged CMS to make similar 
modifications for the formula used to calculate improvement points for 
the

[[Page 26518]]

clinical process of care and outcome measures.
    Response: The formula for achievement points reflects the 
description of how points are assigned to hospitals with scores between 
the threshold and benchmark values. For such hospitals, the range 
between the achievement threshold and benchmark values is partitioned 
into 9 equally spaced intervals and a hospital is awarded from 1 to 9 
points, depending on which of the nine equally spaced intervals its 
score falls. The offered alternatives satisfy much of this description, 
but fail to meet the equal-spacing property. In particular, if we 
revised the scale along the lines suggested by the commenters, the 
interval of scores needed to receive one point would be only half as 
large as the remaining eight intervals. As a result, the number of 
hospitals receiving one point would be reduced and our ability to 
distinguish among hospitals on the lower end of the scale would also be 
reduced.
    Regarding the specific comment that the scoring scale starts with 
only 0.5, we note that, in fact, hospitals scoring within the 
achievement range start with a score of ``round (.5).'' The ``round'' 
function is part of the formula and cannot be ignored without 
significantly altering the resulting calculations, which would prevent 
us from implementing equal spacing within the achievement and 
improvement ranges as described above. We note that within the formula, 
any value that ends in .5 rounds to the next higher integer, so 
``round(.5)'' equals 1 and a hospital scoring at the achievement 
threshold receives 1 point on that measure. Likewise, a score of 4.5 
rounds to 5, and so on.
    The formula for improvement points is similar except that it 
divides the range between the hospital's baseline score and the 
benchmark into 9 equally-spaced intervals and awards a hospital a score 
between 0 and 9 improvement points. Again, the round function is part 
of the formula and needs to be acknowledged (with the similar 
stipulation that values ending in .5 round to the next higher integer). 
Thus, a hospital with a score exactly equal to its improvement 
threshold receives a score of round (-.5), which would equal 0 points.
    Comment: One commenter recommended that the point conversions and 
reconversion steps be removed from the mathematical calculations, and 
that CMS develop a more direct calculation method rather than scoring 
hospitals with points based on measure rates and later converting point 
totals into domain scores.
    Response: The point calculations used to score hospitals on 
performance measures reflect our intent to provide a more[?] robust 
measure scoring methodology than[?] is possible with a more direct 
score calculation. We believe that the point conversions from raw 
measure scores to the 0-10 and 0-9 achievement and improvement ranges, 
respectively, enable us to more clearly communicate assessments of 
hospital performance to hospitals and the public. We note that the 
point calculations allow us to easily calculate and combine points 
earned for both achievement and improvement, as well as compare 
hospitals earning points on different measures in cases when the 
relevant achievement ranges may differ substantially. We will evaluate 
the impact of the scoring methodology and will continue to examine 
alternative scoring methodologies for future years of the program.
    Comment: Some commenters suggested that the proposed scoring 
methodology undervalues improvement, and that establishing a lower 
``improvement benchmark'' would be more appropriate so that the 
improvement range is the same for every hospital.
    Response: We believe establishing a lower benchmark would 
undervalue achievement by lowering the standard by which hospitals may 
achieve 10 points as well as the importance of improving to the highest 
level of care. Setting a separate, lower benchmark for the improvement 
range might also encourage higher achieving hospitals to underperform, 
as they would be rewarded more highly for achieving a lower level of 
improvement. A higher benchmark also allows every hospital to improve 
as much as possible and to the highest level of care.
    Comment: Some commenters agreed with our proposal to exclude the 
``Would You Recommend'' item in the HCAHPS performance score and to 
include only the Overall Rating because they believe that ``recommend'' 
is properly characterized as a measure of expectations. Other 
commenters thought both the Overall Rating and ``Would You Recommend'' 
should be included. One commenter thought the Overall Rating should 
receive more weight than the other HCAHPS dimensions because the 
commenter viewed it as an outcome measure.
    Response: We decided to include only the Overall Rating and not the 
``Would You Recommend'' item in the HCAHPS measure because the two 
global ratings are highly correlated and the ``Would You Recommend'' 
item is more likely to measure expectations and other factors rather 
than the actual patient experience. It is important to note that, while 
there is a high correlation between these items overall, there can 
still be divergence for some hospitals. Thus for purposes of the 
Hospital IQR program, these two dimensions will be reported separately.
    With regard to giving greater weight to the Overall Rating item, we 
believe that the Overall Rating item is no more of an outcome than the 
other HCAHPS items, so it has been given the same weight as the other 
HCAHPS dimensions in the Hospital VBP scoring formula. Compared to the 
other HCAHPS dimensions, the Overall Rating focuses on the overall 
experience, while the other dimensions focus on specific aspects of the 
hospital stay.
    As discussed above, we are finalizing an HCAHPS scoring approach 
that does not use percentiles, and instead will adopt an approach that 
uses the percentage of top-box scores for scoring a hospital's HCAHPS 
calculations. We believe that this change will both simplify the 
calculation of HCAHPS scores and will make the HCAHPS scoring more 
comparable to that of the clinical process of care and outcome 
measures.
    Accordingly, after considering public comments, we are finalizing 
the scoring methodology as follows:
    Hospitals will receive an achievement and improvement score for 
each of the clinical process of care and outcome measures that apply to 
them, and for each HCAHPS dimension. Hospital will earn between 0-10 
points for achievement based on where its performance for the measure 
falls relative to the achievement threshold and the benchmark according 
to the following formula:

[9 * ((Hospital's performance period score - achievement threshold)/
(benchmark - achievement threshold))] + .5, where the hospital 
performance period score falls in the range from the achievement 
threshold to the benchmark

All achievement points will 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 is:
     Equal to or greater than the benchmark, the hospital will 
receive 10 points for achievement.
     Equal to or greater than the achievement threshold (but 
below the benchmark), the hospital will receive a score of 1-9 based on 
a linear scale established for the achievement range

[[Page 26519]]

(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 will receive 0 points for 
achievement.
    Hospitals will earn between 0-9 points based on how much their 
performance on the measure during the performance period improves from 
their performance on the measure during the baseline period 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 will be rounded to the nearest whole number.
    If a hospital's score on the measure during the performance period 
is:
     Greater than its baseline period score but below the 
benchmark (within the improvement range), the hospital will 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 will receive 0 points for improvement.
    Hospitals will earn between 0-20 consistency points on the HCAHPS 
measure based on the lowest of its 8 HCAHPS dimension scores.
    A hospital will receive 0 consistency points if its performance on 
one or more HCAHPS dimensions during the performance period is at least 
as poor as the worst-performing hospital's performance on that 
dimension during the baseline period. A hospital will receive a maximum 
score of 20 consistency points if its performance on all 8 HCAHPS 
dimensions is at or above the achievement threshold.
    Based on comments discussed above, consistency points will be 
awarded proportionately based on the single lowest of a hospital's 8 
HCAHPS dimension scores during the performance period compared to the 
achievement threshold (the 50th percentile of the baseline performance 
score) for that specific HCAHPS dimension. If the lowest score is less 
than the achievement threshold, then the score is based on the distance 
between the achievement threshold (50th percentile of baseline) and the 
floor (0th percentile of baseline). If all 8 of a hospital's dimension 
scores during the performance period are at or above the achievement 
threshold (50th percentile of hospital performance in the baseline 
period), then that hospital will earn all 20 consistency points. (That 
is, if the lowest of a hospital's eight HCAHPS dimension scores is at 
or above the 50th percentile of hospital performance on that dimension 
during the baseline period, then that hospital will earn the maximum of 
20 consistency points). If the lowest score a hospital receives on an 
HCAHPS dimension is at or below the floor of hospital performance on 
that dimension during the baseline period, then 0 consistency points 
will be awarded to that hospital. Otherwise, consistency points will be 
awarded proportionately according to the distance of the performance 
period score for that dimension between the floor and the achievement 
threshold.
    We define the lowest dimension score as the lowest value across the 
eight HCAHPS dimensions using the following formula:

((Hospital's performance period score--floor)/(achievement threshold--
floor)).

    The formula for the HCAHPS consistency points score is as follows:

(20 * (lowest dimension score)-0.5), rounded to the nearest whole 
number, with a minimum of zero and a maximum of 20 consistency points.

Consistency points will be rounded to the nearest whole number (for 
example, 9.5 consistency points would be rounded to 10 points).
    Table 9 below displays floors, achievement thresholds, and 
benchmarks for HCAHPS consistency points applicable to FY 2013 using a 
baseline period of July 1, 2009-March 31, 2010.

Table 9--HCAHPS \1\ Top-Box Scores \2\ Representing the Floor (Minimum), Achievement Threshold (50th Percentile)
 and Benchmark (Mean of Top Decile) for Hospital Value-Based Purchasing: Baseline Period (July 1, 2009-March 31,
                                                      2010)
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                                                                       Floor         threshold       Benchmark
                        HCAHPS dimension                             (minimum)         (50th       (mean of top
                                                                                    percentile)       decile)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses.......................................           38.98           75.18           84.70
Communication with Doctors......................................           51.51           79.42           88.95
Responsiveness of Hospital Staff................................           30.25           61.82           77.69
Pain Management.................................................           34.76           68.75           77.90
Communication about Medicines...................................           29.27           59.28           70.42
Hospital Cleanliness & Quietness................................           36.88           62.80           77.64
Discharge Information...........................................           50.47           81.93           89.09
Overall Rating of Hospital......................................           29.32           66.02           82.52
----------------------------------------------------------------------------------------------------------------
\1\ Includes IPPS hospitals with 100+ completed surveys from patients discharged between July 2009 and March
  2010 (3,211 hospitals). Scores have been adjusted for survey mode and patient-mix.
\2\ ``Top-box'' score is the percentage of patients who chose the most positive response to HCAHPS survey items.

    As stated above, we also note that, to achieve greater uniformity 
of scoring for all of the domains, we are finalizing the definition of 
the benchmark as the mean of the top decile of performance on the 
HCAHPS dimensions, rather than the 95th percentile of performance as we 
had proposed.
    We have provided three examples describing how the clinical process 
of care and outcome measures will be scored. These examples are similar 
to those that were provided in the Hospital Inpatient VBP proposed rule 
(76 FR 2467-2470), but illustrate scoring on a different measure since 
PN-2, used in the proposed rule, is now topped-out. Three more examples 
illustrate how the

[[Page 26520]]

finalized scoring methodology will be applied to the HCAHPS dimensions. 
The clinical process of care examples use AMI-7a ``Fibrinolytic Therapy 
Received Within 30 Minutes of Hospital Arrival,'' while the HCAHPS 
examples are based on the ``Doctor Communication'' dimension.
    Figure 1 shows measure scoring for Hospital B. The benchmark 
calculated for AMI-7a in this case was 0.9191 (the mean value of the 
top decile during the baseline period), and the achievement threshold 
was 0.6548 (the performance of the median or the 50th percentile 
hospital during the baseline period). Hospital B's performance rate of 
0.93 during the performance period for this measure exceeds the 
benchmark, so Hospital B would earn 10 points (the maximum) for 
achievement. The hospital's performance rate on a measure is expressed 
as a decimal. In the illustration, Hospital B's performance rate of 
0.93 means that 93 percent of applicable patients received Fibrinolytic 
Therapy within 30 minutes of arrival. (Because Hospital B has earned 
the maximum number of points possible for this measure, its improvement 
score would be irrelevant.)
[GRAPHIC] [TIFF OMITTED] TR06MY11.045

Figure 2 shows the scoring for another hospital, Hospital I. As can be 
seen below, the hospital's performance on this measure went from 0.4297 
(below the achievement threshold) in the baseline period to 0.8163 
(above the achievement threshold) in the performance period. Applying 
the achievement formula, Hospital I would earn 6 points for this 
measure, calculated as follows:

[9 * ((0.8163-0.6548)/(0.9191-0.6548))] + 0.5 = 5.5 + 0.5 = 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 formula, based on Hospital I's period-to-period 
improvement, from 0.4297 to 0.8163, Hospital I would earn 7 points, 
calculated as follows:

[10 * ((0.8163-0.4297)/(0.9191-0.4297))]-0.5 = 7.9-0.5 = 7.4, 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).

[[Page 26521]]

[GRAPHIC] [TIFF OMITTED] TR06MY11.046

    In Figure 3 shown below, Hospital L's performance on AMI-7a drops 
from 0.72 to 0.64 (a decline of 0.08 points). Because this hospital's 
performance during the performance period is lower than the achievement 
threshold of 0.6548, 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.

[[Page 26522]]

[GRAPHIC] [TIFF OMITTED] TR06MY11.047

    Figure 4 shows Hospital B's scoring on the doctor communication 
dimension. It scores a 90 percent, 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.

[[Page 26523]]

[GRAPHIC] [TIFF OMITTED] TR06MY11.048

    Figure 5 shows that Hospital I's performance on the doctor 
communication dimension rose from 77.19 percent during the baseline 
period to 82.07 percent during the performance period. Because Hospital 
I's performance during the performance period exceeds the achievement 
threshold of 79.42 percent, Hospital I's score would fall within the 
achievement range. According to the achievement scale, Hospital I would 
earn 3 achievement points, calculated as follows:

[9 * ((82.07-79.42)/(88.95-79.42))] + 0.5 = 2.5 + 0.5 = 3

    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 
period-to-period improvement from 77.19 percent to 82.07 percent would 
earn 3.65 improvement points, which would be rounded to 4 points 
calculated as follows:

[10 * ((82.07-77.19)/(88.95-77.19))]-0.5 = 3.65

Using the greater of the two scores, Hospital I would receive 4 points 
for this dimension (rounded to the nearest whole number).

[[Page 26524]]

[GRAPHIC] [TIFF OMITTED] TR06MY11.049

    In Figure 6, Hospital L's performance in the baseline period was at 
11 percent, and its performance declined in the performance period to 6 
percent. Because Hospital L's performance during the performance period 
is lower than the achievement threshold of 79.42 percent, 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.

[[Page 26525]]

[GRAPHIC] [TIFF OMITTED] TR06MY11.050

c. The Total Domain Score and the Total Performance Score
    We proposed to group the measures for the Hospital VBP program into 
domains, which we proposed to define as categories of measures by 
measure type. Because the clinical process of care and outcome measure 
performance scores will be based only on the measures that apply to the 
hospital, we proposed to normalize the domain scores across hospitals 
by converting the points earned for each domain to a percentage of 
total points. We proposed 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.
    For purposes of the Hospital VBP program in FY 2013, we also 
proposed that only two domains will be scored, the clinical process of 
care and patient experience of care. In determining how to 
appropriately weight quality measure domains, we considered a number of 
criteria. Specifically, we considered the number of measures that we 
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) and 
Departmental quality improvement priorities. We strongly believe that 
outcome measures are important in assessing the overall quality of care 
provided by hospitals. However, for reasons outlined in the Hospital 
Inpatient VBP Program proposed rule (76 FR 2461), we did not propose to 
include outcome measures in the FY 2013 Hospital VBP program. Taking 
all of these considerations into account, we proposed 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 
proposed this weighting scheme because the proposed clinical process of 
care measures comprise all but one of the measures we proposed to 
include in the FY 2013 Hospital VBP program. We believe assigning a 30 
percent weight to the patient experience of care domain is appropriate 
because the HCAHPS measure is comprised of eight dimensions that 
address different aspects of patient satisfaction.
    We solicited public comment on the domain weighting approach and 
calculation of the total performance score, as well as the utility and 
appropriateness of alternative methods.
    Comment: Some commenters suggested that we weight Total Performance 
scores by ``opportunities to provide care,'' rather than equally 
weighting each measure within each domain.
    Response: We thank commenters for their suggestion. However, we 
believe that weighting each measure within a domain equally will 
encourage hospitals to consider each of them equally in their quality 
improvement initiatives. We also believe that weighting by the number 
of opportunities, the suggested alternative, would overemphasize the 
SCIP measures, which often have opportunity counts that are much larger 
than the corresponding counts for measures related to other topics or 
conditions.
    Comment: Many commenters opposed our proposal to weight the patient 
experience of care domain at 30 percent, arguing that the HCAHPS survey 
composing the domain is subjective, and is not sufficiently risk 
adjusted for

[[Page 26526]]

patient characteristics or other factors. Those commenters suggested 
various proposed weights but generally called on us to lower the 
patient experience of care domain weight. One commenter suggested that 
we weight the patient experience of care domain higher than 30 percent 
of the Total Performance Score. A few commenters supported our 
proposal.
    Response: We appreciate the commenters' suggestions. However, we 
disagree with weighting the patient experience of care domain either 
higher or lower than proposed. As we detailed in the Hospital Inpatient 
VBP Program proposed rule (76 FR 2475), we considered many factors when 
determining the appropriate domain weights for the FY 2013 program, 
including the number of measures in each domain, the reliability of 
individual measure data, systematic effects of alternative weighting 
schemes on hospitals according to their location and characteristics, 
and Departmental quality improvement priorities. We also believe that 
delivery of high-quality, patient-centered care requires us to 
carefully consider the patient's experience in the hospital inpatient 
setting.
    Comment: Some commenters suggested that CMS should convene focus 
groups of Medicare beneficiaries to determine the relative importance 
of clinical process of care and patient experience of care domains for 
weighting.
    Response: We believe that we have received significant public input 
to inform our approach for weighing each domain. Many public comments 
on the proposed rule discussed the weighing and relative importance of 
the domains, and supported the proposed weighting distribution. We 
will, however, continue to monitor the weighing distribution between 
domains and will consider commenters' suggestions as the program goes 
forward and new measures and domains are added.
    Comment: Commenters suggested that we place greater weight on 
outcome measures compared to clinical process of care measures and that 
we emphasize overall rating dimensions of the HCAHPS survey over other 
dimensions.
    Response: We will take the commenters' suggestion to weight the 
outcome domain more heavily than the clinical process of care domain as 
we develop our weighting proposals for the FY2014 Hospital VBP program. 
However, as we stated earlier, we believe that all measures within a 
domain should be weighted equally in order to encourage hospitals to 
improve their performance on all of them.
    Based on the comments we received, we are finalizing the 
calculation of the clinical process of care and outcome domain scores 
as follows:
    1. For each domain:

Total earned points for domain = Sum of points earned for all 
applicable domain measures

    2. Each hospital also has 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

    3. For each domain, the total domain score would be calculated as a 
percentage, as follows:

Domain score = Total earned points for domain divided by Total possible 
points for domain multiplied by 100 percent.

    We are also finalizing the calculation of the patient experience of 
care domain 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 8 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.

    After consideration of public comments, we are finalizing the 
calculation of a hospital's Total Performance Score as follows:

Multiply the hospital's performance score for each domain by the weight 
for that domain (70 percent clinical process of care, 30 percent 
patient experience of care), and add those weighted scores together.
d. Alternative Performance Scoring Models
    We discussed our analysis of several alternative performance 
scoring models in addition to the model proposed (76 FR 2476-2478). We 
solicited public comments on the proposed model as well as the other 
potential performance scoring models. The comments we received on these 
models and our responses are set forth below.
    Comment: While agreeing with the analysis of scoring models 
considered in the proposed rule, one commenter asked that CMS consider 
including aspects of the Appropriate Care Model (ACM) in the Hospital 
VBP program scoring methodology, perhaps by creating a hybrid model in 
which a portion of the overall performance score is determined by an 
ACM-like measure of patient-level appropriate care.
    Response: The ACM, also referred to as the ``all-or-none'' model, 
is intended to be a more patient-centric method of assessing hospital 
performance on the clinical process of care measures (see 76 FR 2476-
2478).
    The ACM creates sub-domains by topic for the clinical process 
measures and is distinguished from the other two models described in 
the Hospital Inpatient VBP Program proposed rule (namely, the Three-
Domain Performance Scoring Model and the Six-Domain Performance Scoring 
Model) 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. As discussed in the proposed rule, 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. 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 stated our belief 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. The ACM is 
considered to be ``patient focused'' rather than ``opportunity 
focused.'' Due

[[Page 26527]]

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-or-nothing 
scoring, the ACM approach captures whether a patient received 
appropriate care, but it does not describe the extent of lacking care. 
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.
    We will continue analyzing alternative performance scoring models, 
including the ACM, and will consider proposing to implement scoring 
models other than the Three-Domain Performance Scoring Model in the 
future. As the industry continues to develop sets of measures that 
capture many aspects of quality for various conditions, we will seek to 
examine more patient-centered scoring methodologies and measures, and 
will certainly consider hybrid models such as the one described by the 
commenter.

G. Applicability of the Value-Based Purchasing Program to Hospitals

    Section 1886(o)(1)(C) of the Act specifies how the value-based 
purchasing program applies 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'' because they are hospitals located in one of the 50 
states. Therefore we proposed 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 proposed that, for purposes of this provision, we would 
adjust payments to hospitals as they are distinguished by provider 
number in hospital cost reports. We proposed 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.
    Comment: Several commenters, including national and state hospital 
associations, expressed their support of our proposal to apply the 
Hospital VBP program to subsection (d) hospitals in accordance with the 
statutory requirement. Clarification was requested regarding whether 
critical access hospitals (CAHs) and subsection (d) hospitals that are 
in CMS demonstrations for their inpatient payment, such as the Rural 
Community Hospital Demonstration Program, are to be included in the 
Hospital VBP program.
    Response: 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.'' This does not include IPPS hospitals in Puerto 
Rico. We are finalizing that we shall identify these hospitals by the 
CMS Certification Number (CCN) of the main Provider (also referred to 
as OSCAR number), calculate, and make the payment adjustments based on 
this identification.
    CAHs are designated under section 1820(c); therefore, consistent 
with section 1886(o)(1)(C)(i), which limits participation in the 
Hospital VBP program to subsection (d) hospitals, they are ineligible 
to participate in the Hospital VBP program.
    Hospitals that participate in the Rural Community Hospital 
Demonstration Program are subsection (d) hospitals; therefore, the 
Hospital VBP program would apply to them. To the extent there are other 
demonstrations involving subsection (d) hospitals, we will need to 
evaluate each individual demonstration to determine how it might 
potentially overlap with the Hospital VBP program.
    Comment: Several commenters requested that CMS exempt hospitals in 
Maryland from the Hospital VBP program. Commenters described current 
quality efforts in Maryland relating to quality reporting, hospital-
acquired conditions, and readmissions. Some stated that ``requiring 
Maryland to comply with the federal program in addition to the existing 
State programs would be burdensome and duplicative.'' Several 
commenters noted that the State intended to submit a report pursuant to 
section 1886(o)(1)(C)(iv).
    Response: Our proposal was to apply the Hospital VBP program to 
acute care hospitals in Maryland paid under the 1814(b)(3) waiver 
unless the Secretary exercised her discretion to exempt these 
hospitals. We intend to make this the subject of future rulemaking.
    Inpatient acute care hospitals located in the State of Maryland 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, 
Maryland hospitals continue to meet the definition of a ``subsection 
(d) hospital'' under section 1886(d)(1)(B) of the Act because they are 
hospitals located in one of the 50 states. While these hospitals are 
not subject to the payment reduction under the Hospital IQR program, 
all or nearly all of them submit data to Hospital Compare on a 
voluntary basis. Therefore, we do not believe that requiring these 
hospitals to participate in the Hospital VBP program would create an 
additional or duplicative burden for them. Section

[[Page 26528]]

1886(o)(1)(C)(iv) of the Act grants the Secretary discretion to exempt 
hospitals paid under section 1814(b)(3) from the Hospital VBP program, 
but only 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.'' To facilitate future 
rulemaking on this topic, we believe that this report should be 
received prior to the Secretary's consideration of whether to exercise 
discretion under section 1886(o)(1)(C)(iv) of the Act.
    According to section 1886(o)(1)(B) of the Act, the Hospital VBP 
program applies to discharges occurring on or after October 1, 2012. 
Therefore, in response to public comment, we are adopting the following 
procedure for submission of the state report in order for a hospital 
within the state to be exempt from the Hospital VBP program: a State 
shall submit, in writing and electronically, a report pursuant to 
section 1886(o)(1)(C)(iv) in a timeframe such that allows it to be 
received no later than October 1, 2011, which is the beginning of the 
fiscal year prior to the beginning of FY 2013. The statute requires the 
report to describe 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.'' We 
request that the report be as specific as possible in describing the 
quality (and other) measures included and in describing the results 
achieved over an applicable time period, noting that for the initial 
report the applicable time period would likely be before and after 
implementation of the State program. In response to commenters' 
discussion of readmissions-related quality efforts in Maryland, we 
point out that 1886(o)(2)(A) specifically excludes measures of 
readmissions from the Hospital VBP program.
    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 applicable fiscal year. Therefore, any hospital 
that is subject to the Hospital IQR program payment reduction because 
it does not meet the requirements for the Hospital IQR program will be 
excluded from the Hospital VBP program for such 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 
applicable percentage increase for the fiscal year. We intend to track 
hospital participation in the Hospital IQR program and welcome public 
input 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 proposed that these hospitals will 
still be included in the Hospital VBP program, but that they will be 
scored based only on achievement. We invited public comments on this 
approach and requested input on how to score 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 proposed to interpret this provision to mean that any 
hospital that is cited by CMS through the Medicare State Survey and 
Certification process for deficiencies during the performance period 
(for purposes of the FY 2013 Hospital VBP program, the performance 
period is 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 also proposed 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 statute requires 
the Secretary to 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 through 2008 and 2008 through 
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 finalized Hospital VBP program scoring methodology 
aggregates information across all of the 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 between-hospital 
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 clinical process measure, the analysis 
compared the reliability of clinical process measure scores for 
hospitals according to the

[[Page 26529]]

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 clinical process measure was met. Based on this 
analysis, we proposed 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.
    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 proposed to exclude from hospitals' Total Performance Score 
calculation any measures on which they report fewer than 10 cases. We 
also proposed to exclude from the Hospital VBP program any hospitals to 
which less than 4 of the measures apply.
    We also proposed 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. RAND's analysis indicates that 
HCAHPS data does not achieve adequate reliability with a sample of less 
than 100 completed surveys to ensure that true hospital performance 
rather than random ``noise'' is measured. RAND's analysis indicates 
that HCAHPS data are significantly below 85 percent reliability levels 
across all HCAHPS dimensions with a sample of less than 100 completed 
surveys.
    As proposed in the Hospital Inpatient VBP Program proposed rule (76 
FR 2481), 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 VBP program.
    We solicited 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.
    We also note that the independent analysis conducted by Brandeis 
only looked at clinical process of care measures and for that reason, 
we intended that our proposal for the 10 case and 4 measure minimums 
apply only to those measures. We intend to make a separate proposal on 
what specific minimum numbers of cases and measures should apply to the 
outcome domain in future rulemaking. To the extent that the comments to 
the Hospital Inpatient VBP proposed rule pertained to what specific 
minimums would be appropriate for the outcome domain, we will take them 
into consideration as we develop our proposal. We will address the 
comments in this final rule insofar as they relate to what minimum 
numbers would be appropriate for the clinical process of care and 
patient experience of care domains.
    Comment: Some commenters asked if very small hospitals will be 
subjected to the 1.0 percent reduction in base operating DRG amounts 
without being eligible for value-based incentive payments.
    Response: Hospitals to which the Hospital VBP program does not 
apply will not receive a reduction to their base operating DRG amounts.
    Comment: Many commenters asked that new hospitals not be included 
in the Hospital VBP program until they have sufficient time to 
implement all of their quality initiatives and begin meeting the 
requirements under the Hospital IQR program, and that new hospitals be 
given the opportunity to be scored on improvement during their first 
year of participation in the Hospital VBP program. Several other 
commenters objected to the inclusion of any hospitals that did not have 
sufficient measure data from the baseline period with which to 
calculate improvement scores, claiming that it would be unfair to deny 
these hospitals the opportunity to receive potentially higher scores 
based on improvement points. One commenter asked whether a hospital 
assigned a CCN in January 2010 would be scored based on a shorter 
baseline period or scored based only on achievement.
    Response: We recognize the commenters' concerns regarding the fair 
treatment of all hospitals in the Hospital VBP program and the desire 
that all hospitals be given the opportunity to earn improvement points. 
However, we do not believe that we have authority to exclude these 
hospitals from the Hospital VBP program; section 1886(o)(1)(C)(ii) of 
the Act sets forth specific exclusions to the term ``hospital'' for 
purposes of the program, and none of these exclusions relate to 
hospitals that do not have baseline performance measure data. If a 
hospital does not have a minimum number of cases on a given measure in 
the baseline period, then we interpret the hospital to have ``no 
measure data from the baseline period'' with which to calculate an 
improvement threshold. In such a case, the hospital would not be scored 
on improvement for that measure. If, however, a hospital reports the 
minimum number of cases during the applicable baseline period on a 
given measure--whether such data was obtained throughout the entire 
baseline period or only over a portion of such period--then the 
hospital's data during the performance period would be compared to its 
baseline period performance for the purpose of determining improvement 
points for that measure. Hospitals not scored on improvement for a 
given measure will still have the opportunity to score up to 10 
achievement points on that measure. As noted above, we believe it is 
important to include as many hospitals as possible in order to 
successfully implement the Hospital VBP program and succeed in 
achieving the Hospital VBP program goals. Thus, the program will apply 
to hospitals, as that term is defined in section 1886(o)(1)(C)(i), and 
provided that none of the exclusions in section 1886(o)(1)(C)(ii) 
apply.
    Comment: Commenters suggested that CMS should develop a new value-
based purchasing program specific to cancer centers. Other commenters 
suggested that CMS consider promoting disease-specific quality programs 
across all care settings.
    Response: We thank the commenters for their input. We will 
certainly take their suggestions under advisement for future quality 
improvement efforts. We note that the Affordable Care Act requires the 
Secretary to implement a number of new value-based purchasing and 
quality reporting initiatives across various health care settings, 
including quality reporting programs for cancer care hospitals and 
psychiatric hospitals, as well as to develop plans for value-

[[Page 26530]]

based purchasing efforts in the home health and skilled nursing 
settings.
    Comment: Several commenters requested improvements to or 
clarification of the Medicare State Survey and Certification Process 
prior to its use in the Hospital VBP program.
    Response: We proposed to interpret the statutory exclusion at 
Section 1886(o)(1)(C)(ii)(II) to mean that any hospital that is cited 
by CMS through the Medicare State Survey and Certification process for 
deficiencies during the performance period that pose immediate jeopardy 
to patients will be excluded from the Hospital VBP program for the 
fiscal year. We proposed to use the definition of the term ``immediate 
jeopardy'' that appears in 42 CFR Sec.  489.3. We intend to further 
evaluate the application of this definition to the Hospital VBP context 
and may make additional proposals related to the ``immediate jeopardy'' 
exclusion in section 1886(o)(1)(C)(ii)(II) in future rulemaking.
    Comment: Many commenters suggested different numbers of minimum 
cases for hospitals to be included in Hospital VBP, arguing that 10 
cases per clinical process measure are insufficient to produce reliable 
measure scores. A number of commenters argued that CMS should use the 
same reliability criteria it uses for purposes of displaying measure 
information on Hospital Compare for purposes of defining the minimum 
case threshold for the Hospital VBP program.
    Response: There are currently no minimum case thresholds for the 
clinical process of care measures reported on Hospital Compare, and all 
clinical process of care data, regardless of sample size, are made 
publicly available. We recognize that there is currently a footnote 
added where the Hospital IQR reported clinical process of care measure 
rates are based on less than 25 cases, and we note that we originally 
believed that this footnote was appropriate based on the work we did in 
developing the Hospital Compare display parameters for Hospital IQR 
data. However, the more recent independent analysis that was completed 
as part of the development of the Hospital Inpatient VBP proposed rule 
indicates that the clinical process of care measure data is reliable 
with fewer than 25 cases, and we plan to revise the footnote on 
Hospital Compare.
    Comment: Many commenters called on us to publish the independent 
analysis we used to determine the appropriate minimum numbers of cases 
and measures for the Hospital VBP program.
    Response: To the extent that these analyses are not subject to 
privilege, we will make available additional information, including the 
study results and methods, and will inform the public when such 
information is available.
    Comment: One commenter asked whether we had considered the impacts 
of the proposed measure and case minimums on hospitals' ability to 
compete for value-based incentive payments.
    Response: As detailed in the Hospital Inpatient VBP proposed rule 
(76 FR 2480), we considered many factors when developing the measure 
and case minimums, including the reliability of Total Performance 
Scores, the number of hospitals included in the program, and the impact 
on small hospitals under various scenarios. We believe that reliable 
clinical process of care and patient experience of care domain scores 
can be generated based on the proposed minimum numbers of cases, 
measures, and completed HCAHPS surveys, and that hospitals will be able 
to fairly compete for value-based incentive payments.
    Comment: Some commenters suggested that we should consider other 
performance measures for hospitals with few cases.
    Response: We note that section 3001(b)(2) of the Affordable Care 
Act requires the Secretary to establish a value-based purchasing 
demonstration program for hospitals that are excluded from the Hospital 
VBP program because they do not have the minimum number of cases or 
measures.
    Comment: One commenter suggested that CMS require hospitals to 
submit a minimum of 300 HCAHPS surveys per year in order to be included 
in Hospital VBP; another commenter questioned whether 100 completed 
HCAHPS surveys will still be the minimum number required in the future 
should Hospital VBP move to a 12-month performance period rather than 
the 9-month performance period finalized for the FY 2013 Hospital VBP 
program. Another commenter was concerned that the HCAHPS exclusion of 
patients discharged to a nursing home would not permit hospitals to 
achieve a sufficient number of completed surveys.
    Response: Because of reliability concerns, if a hospital has less 
than 100 completed surveys, we will not calculate an HCAHPS performance 
score for the Hospital VBP program (and thus will exclude the hospital 
from the Hospital VBP program). The requirement for 100 completed 
surveys pertains to both the 9 month and 12 month performance periods 
as the 100 survey requirement is based upon the reliability of the 
data, not the number of calendar quarters. In either time period, we 
want to ensure that we have reliable data to measure performance. Using 
statistical measures of reliability that calculate the proportion of 
the variance in reported hospital scores that is due to true variation 
between hospitals, rather than within hospital variation that reflects 
limited sample size, HCAHPS data have been found to be unreliable when 
a hospital achieves under 100 survey completes.
    Patients that are discharged to nursing homes are excluded from the 
survey due to numerous problems that have been encountered by HCAHPS 
survey vendors and self-administering hospitals in contacting nursing 
home patients. We have also found, based on our own research on this 
topic, that the response rate for nursing home residents is extremely 
low. By increasing their sampling of patients not discharged to nursing 
homes, hospitals can achieve a sufficient number of completed surveys.
    Based on the comments we received, we are finalizing our proposals 
regarding the applicability of the Hospital VBP program to hospitals, 
including calculating and making payment adjustments for this provision 
using the CCN of the main provider and making payments to each provider 
of record. Further, we adopt the procedures noted above for submission 
of the report required under section 1886(o)(1)(C)(iv) and note that we 
intend to make the question of whether to exempt Maryland hospitals 
from the Hospital VBP program the subject of future rulemaking.
    We are also finalizing a policy to exclude from a hospital's total 
performance score its score on any clinical process measure for which 
it reports fewer than 10 cases, and to exclude from the Hospital VBP 
program any hospital to which less than 4 of the clinical process 
measures apply. We are also finalizing our proposal to exclude from the 
FY 2013 Hospital VBP program a hospital that reports fewer than 100 
HCAHPS surveys during the performance period. Finally, we are 
finalizing our proposal to score hospitals only based on achievement if 
we have measure data from the performance period but no measure data 
from the baseline period. However, as discussed above, we will 
interpret ``no measure data from the baseline period'' to include data 
that does not meet the minimum measure and case thresholds that we are 
adopting in this final rule for the clinical process of care and 
patient experience of care domains. We believe that calculating an 
improvement threshold requires at least as much data

[[Page 26531]]

as is required for calculating measure scores during the performance 
period in order to ensure valid comparisons between the two periods. We 
further believe that the analyses we commissioned to determine the 
minimum number of cases, measures, and completed HCAHPS surveys during 
the performance period can be appropriately applied to requiring these 
minimums in the baseline period to create an improvement threshold.

H. 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 FY 2013, the term ``applicable percent'' 
is defined as 1.0 percent, but the amount gradually rises to 2.0 
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 S-shape (logistic 
function).

[[Page 26532]]

[GRAPHIC] [TIFF OMITTED] TR06MY11.051

    In determining which of these exchange functions would be most 
appropriate for translating a hospital's Total Performance Score 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 value-based 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 interpreted this section to mean that 
the redistribution of a portion of the IPPS payments 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 all 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 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 Total Performance Score that is 0.1 higher than 
another hospital would receive the same increase in its value-based 
incentive payment across the entire Total Performance Score 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

[[Page 26533]]

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 proposed to adopt a 
linear exchange function for the purpose of calculating the percentage 
of the value-based 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 rewards higher performing 
hospitals more aggressively than the cube root function, but not as 
aggressively as the logistic and cube functions. We proposed 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) of the Act, that the total 
amount of value-based incentive payments equal the estimated amount 
available under section 1886(o)(7)(A). In other words, we proposed to 
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 1.0 percent of the estimated aggregate base operating DRG 
payment amounts for FY 2013. We proposed that 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 solicited public comments 
on our exchange function and the resulting distribution of value-based 
incentive payments.
    We noted in the Hospital Inpatient VBP Program proposed rule that, 
in order evaluate the different exchange functions, we needed to 
estimate the value-based incentive payment amount. As stated above, 
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 low-volume 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 
solicited 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 2.0 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 percent as the applicable percent. We multiplied 
an estimate (described above) of the total aggregate base operating DRG 
payments for hospitals as defined under section 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.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: The majority of commenters, including MedPAC, expressed 
support for our proposed linear exchange function with an intercept of 
zero during the initial years of the Hospital VBP program. The reasons 
cited by these commenters included that a linear exchange function 
appropriately incentivizes both high- and low-performing hospitals; it 
is more straightforward than the alternative functional forms discussed 
in the Hospital Inpatient VBP Program proposed rule (that is cube, cube 
root, and logistic); and it provides a relatively more even 
distribution of incentive payments. Many commenters indicated that we 
should consider revisiting the issue of the exchange function once we 
have actual data and experience under an implemented Hospital VBP 
program. Some of these commenters, including MedPAC, suggested that 
over time we could consider providing stronger incentives to lower 
performing hospitals depending on the initial experience and data.
    A few commenters did not support the use of the linear exchange 
function with an intercept of zero. These commenters indicated that we 
need to provide greater incentives to lower performing hospitals in the 
initial implementation, such as through the use of a cube root exchange 
function.
    Commenters also requested transparency with respect to the slope of 
the linear exchange function for FY 2013 and the associated issues of 
budget neutrality, payment impacts, and the maximum performance-based 
payment adjustment that can be made to a hospital's base operating DRG 
payment amount. They also requested additional operational detail on 
how CMS will distribute the incentive payment

[[Page 26534]]

amounts to the hospitals once they have been determined.
    Response: We agree with the commenters who supported our proposed 
linear exchange function. It provides all hospitals with the same 
marginal incentive to continually improve. It more aggressively rewards 
higher performing hospitals than the cube root function, but not as 
aggressively as the logistic and cube functions. It is also the 
simplest and most straightforward of the mathematical exchange 
functions discussed in the Hospital Inpatient VBP Program proposed 
rule.
    We disagree with the commenters who stated that we need to provide 
greater incentives to lower performing hospitals in the initial 
implementation of the Hospital VBP program, such as through the use of 
a cube root exchange function. At this time we believe it would be 
prudent to examine the experience and data from the initial 
implementation of the program before considering increasing the 
incentives to lower performing hospitals. We note that increasing the 
incentives to lower performing hospitals would result in decreased 
incentives for higher performing hospitals due to the requirement in 
section 1886(o)(6)(C)(ii)(II) of the Act that the total amount 
available for value-based incentive payments under section 1886(o)(6) 
for all hospitals for a fiscal year be equal to the total amount of 
reduced payments for all hospitals under section 1886(o)(7)(B) for such 
fiscal year, as estimated by the Secretary.
    With respect to the slope of the linear exchange function for FY 
2013, we fully intend to provide the final exchange function slope once 
our actuaries have the data necessary to calculate it. As noted in the 
Hospital Inpatient VBP Program proposed rule (76 FR 2483), our 
actuaries will calculate 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 1.0 percent of the estimated aggregate base 
operating DRG payment amounts for FY 2013. It is not possible for our 
actuaries to calculate the final slope of the linear exchange function 
until we have the data from the performance period.
    As we have indicated previously, we intend to propose a definition 
of the base operating DRG payment amount in future rulemaking. We also 
intend to provide additional operational detail concerning how 
hospitals will receive the value-based incentive payments in a future 
rule.
    As requested by many commenters, we would consider revisiting the 
issue of the exchange function depending on the actual data and 
experience under the implemented Hospital VBP program.
    Comment: One commenter argued that an increasing proportion of 
hospital payments should be tied to performance, eventually even above 
the 2.0 percent margin.
    Response: Section 1886(o)(7)(C) of the Act provides for an annual 
increase in the funding for available value-based incentive payments 
from FY 2013 to FY 2017, adjusting the applicable percent of base 
operating DRG payments available for value-based incentive payments as 
follows: with respect to FY 2013, 1.0 percent; with respect to FY 2014, 
1.25 percent; with respect to FY 2015, 1.5 percent; with respect to FY 
2016, 1.75 percent; and with respect to FY 2017 and succeeding fiscal 
years, 2 percent. In effect, this will tie an increasing proportion of 
hospital payments to performance on quality measures. CMS does not have 
authority to increase the base DRG operating payment withhold amount 
above 2.0 percent.
    After considering the public comments, we are finalizing the 
exchange function as proposed.

I. Hospital Notification and Review Procedures

    Section 1886(o)(8) of the Act 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 DRG payment amount (section 1886(o)(7)(B)(i)) not 
later than 60 days prior to the fiscal year involved. We proposed to 
notify hospitals of the 1.0 percent reduction to their respective 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 FY 2013. We expect to propose to incorporate this reduction into our 
claims processing system in January 2013, which will allow the 1.0 
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 performance period would end only six months prior 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 proposed 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 proposed 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 proposed 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 hospital's Total Performance Score. To meet this 
requirement, we proposed to publish hospital scores with respect to 
each measure, each hospital's condition-specific score (that is, the 
performance score with respect to each condition or procedure, for 
example, AMI, HF, PN, SCIP, HAI), each hospital's domain-specific 
score, and each hospital's Total Performance Score on the Hospital 
Compare Web site. We note that we did not propose to use a hospital's 
condition-specific score for purposes of calculating its Total 
Performance Score under the Three-Domain Performance Scoring Model.
    Section 1886(o)(10)(A)(ii) of the Act 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 proposed to derive 
the Hospital VBP measures data directly from measure data submitted by 
each hospital under the Hospital IQR program. We proposed that the 
procedures we adopt for the Hospital IQR program will also be the 
procedures

[[Page 26535]]

that hospitals must follow in terms of reviewing and submitting 
corrections related to the information to be made public under section 
1886(o)(10) of the Act.
    With respect to the FY 2013 Hospital VBP program, we proposed 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 
proposed 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 proposed to provide hospitals with 30 calendar 
days to review and submit corrections related to their performance 
measure scores, condition-specific scores, domain-specific scores and 
Total Performance Score.
    Section 1886(o)(10)(B) requires the Secretary to periodically post 
on the Hospital Compare Web site 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 value-based incentive 
payment available for the fiscal year involved and the range and amount 
of such payments. We proposed to post aggregate Hospital VBP 
information on the Hospital Compare Web site in accordance with Section 
1886(o)(10)(B) of the Act. We will provide further details on reporting 
aggregated information in the future.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: Some commenters expressed general support for our 
proposals to display 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 for the FY 2013 Hospital VBP program, specifically noting time 
limitations in the statutory timeline.
    Response: We thank commenters for their support.
    Comment: Some commenters called on CMS to translate hospitals' 
Total Performance Scores into publicly reported data that is meaningful 
to consumers and those employers sponsoring health care coverage for 
their employees, specifically by listing data not only for Medicare 
patients but for all patients. One commenter additionally requested 
that hospitals' performance be evaluated and reported on an individual 
basis, even if hospitals are commonly owned and operating upon one 
license, and, therefore, reporting as one entity. One commenter asked 
if CMS will publish hospital-specific incentive payment percentages or 
amounts.
    Response: As discussed in the Hospital Inpatient VBP Program 
proposed rule (76 FR 2484), 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. 
We proposed to publish hospital scores with respect to each measure, 
each hospital's condition-specific score, each hospital's domain-
specific score, and each hospital's Total Performance Score on the 
Hospital Compare Web site. We will make every effort to make the 
information presented as usable and clear for public use as possible. 
However, we do not plan at this point to make public hospital-specific 
incentive payment percentages or amounts because we believe that the 
information required to be publicly reported adequately describes each 
hospital's individual performance under the program. With respect to 
the request that we report performance information for individual 
hospitals that are commonly owned, CMS currently receives and displays 
data under the Hospital IQR program by CCN number. One CCN number can 
apply to multiple campuses of one hospital. Although hospital owners 
have chosen to enroll these campuses in the Medicare program as one 
integrated hospital rather than as separate hospitals, we are aware 
that members of the public tend to view them as separate hospitals. CMS 
is currently exploring best methods to make data publicly available for 
each campus of multi-campus hospitals operating under one CCN number 
and will take this comment into consideration as it seeks to improve 
transparency of hospital performance for consumers.
    Comment: One commenter suggested that we develop a composite 
quality measurement system for the Hospital Compare Web site similar to 
the Society of Thoracic Surgeons' Adult Cardiac Surgery Database.
    Response: We thank the commenter for the suggestion. We are 
continuing to look for ways to decrease the reporting burden to 
hospitals and make the information that we include on Hospital Compare 
meaningful for consumers. We will take the suggestion under advisement.
    Comment: Commenters questioned how the Hospital VBP program would 
ease reporting burdens and aid consumers if, although hospitals are 
required to report measure data, some of the data reported would not be 
made publicly available on Hospital Compare.
    Response: We note that all data used to evaluate hospital 
performance in Hospital VBP will also be submitted by hospitals under 
the Hospital IQR program. Accordingly, the Hospital VBP program does 
not impose reporting requirements on hospitals in addition to or 
different from those imposed by the Hospital IQR program. We believe 
that the data as reported on Hospital Compare adequately reflects each 
hospital's performance without miring the consumer in too much detail. 
As discussed above, consumers will be able to see each hospital's score 
with respect to each measure, each hospital's condition-specific score, 
each hospital's domain-specific score, and each hospital's Total 
Performance Score on the Hospital Compare Web site. We are aware that 
the score for a measure for purposes of the Hospital VBP program might 
differ from the rate we display for that measure for purposes of the 
Hospital IQR program based on differing date ranges used for each 
program and the fact that the Hospital VBP data will reflect a 
hospital's performance score on the measure. We will make every effort 
to ensure that these differences are clearly explained to the public.
    Comment: Many commenters asked that frequently updated calculations 
be provided for each hospital. Some commenters specifically asked for 
quarterly hospital preview reports with a percentile ranking for each 
hospital. Other commenters suggested CMS make available a report 
through QualityNet that would provide constant updates and status about 
value-based purchasing scoring calculations and each hospital's 
individual and up-to-date scores.
    Response: We believe that yearly updates of Hospital VBP 
performance information will provide the most simplicity and clarity 
for hospitals, although we will certainly consider commenters' 
suggestions as the program moves forward. We note that Total 
Performance Scores are based on measure data from the entirety of the 
performance period, not any subset. We are concerned that providing 
hospitals with a calculation of their scores based on only a portion of 
the performance period would be misleading because the scores would be 
based on insufficient data and could be significantly different from 
the hospitals' Total Performance Scores, which will be based on data 
from entire performance periods. For

[[Page 26536]]

these reasons, we believe calculating Hospital VBP scores based on the 
data from the entire performance period will provide hospitals with the 
best and most reliable information for their use.
    Comment: Some commenters asked CMS to provide the final, adjusted 
DRG payments 30 days before October 1, 2012 to avoid claims 
reprocessing for the value-based incentive payments.
    Response: 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 proposed to notify hospitals of the 1.0 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 1.0 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 finalized nine-month performance period will end only 
six months prior to the beginning of FY 2013, we will not have enough 
time to calculate 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 
proposed 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 proposed 
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 proposed 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.
    We made these notification proposals because we concluded that 
using a full year as the FY 2013 performance period would not give us 
sufficient time to calculate the total performance scores and value-
based incentive payments, notify hospitals regarding their payment 
adjustments, and implement the payment adjustments.
    While we generally agree with commenters' suggestion, we believe 
our finalized performance period and notification policies outlined 
above appropriately balance the need for a robust FY 2013 performance 
period with hospitals' desire to receive value-based incentive payments 
as quickly as possible.
    Comment: One commenter asked how often the rankings for each 
hospital, based on individual Total Performance Scores, will be 
updated. The commenter also asked if there will be a data backlog for 
such rankings, and, if so, how great.
    Response: We have not proposed to provide ``rankings'' of hospitals 
based on their Total Performance Scores. Rather, the hospitals' Total 
Performance Scores will be calculated annually at least 60 days prior 
to the beginning of the fiscal year. As stated above, because the Total 
Performance Scores depend on the entirety of hospitals' data submitted 
during the performance period, we do not believe that providing more 
frequent updates to the Total Performance Scores than on an annual 
basis would be helpful to providers or the public.
    While there is a delay between the conclusion of the performance 
period and the beginning of the fiscal year in which the corresponding 
value-based incentive payments will be made, this time period is 
necessary for hospitals to submit the required data, for that data to 
be validated, for hospitals to review and submit corrections to 
information that will be made public, and for us to calculate Total 
Performance Scores. We do not view this delay as a ``backlog,'' which 
we would interpret in this context as an extraordinary delay in data 
submission, validation, processing and notifications to hospitals.
    As noted above, we will provide further details on information to 
be made public with respect to hospitals' performance scores in the 
future. We will consider the commenter's implicit suggestion that we 
should provide rankings in the future.
    After considering the public comments, we are finalizing the 
notification and review provisions of the Hospital Inpatient VBP 
Program proposed rule as proposed.

J. 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) of the Act, 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 solicited public comment, in general, on the structure and 
procedure of an appropriate appeals process. Specifically, we solicited 
comment on the appropriateness of a process that would establish an 
agency-level appeals process under which CMS personnel having 
appropriate expertise in the Hospital VBP program would decide the 
appeal. We sought insight on what qualifications such personnel should 
hold. We solicited comment on how the appeals process should be 
structured. Finally, we solicited public input on the timeframe in 
which these appeals should be resolved.
    The comments we received on this proposal and our response are set 
forth below.
    Comment: Many commenters called on us to establish an appeals 
process as soon as possible or prior to FY 2012. Others provided 
suggestions on the proper form of an appeals process, including a peer-
reviewed process similar to QIOs or an informal dispute resolution 
process such as that outlined in the CMS State Operations Manual, 7212.

[[Page 26537]]

    Response: We thank commenters for their input. These comments will 
inform future rulemaking on this issue.

K. FY 2013 Validation Requirements for Hospital Value-Based Purchasing

    In the FY 2011 Inpatient Prospective Payment System (IPPS) final 
rule (75 FR 50225 through 50230), we adopted a validation process for 
the FY 2013 Hospital IQR program. We proposed 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, 
or a subset of, 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.
    We note that we recently proposed to shorten the timeframe for 
submitting medical records for purposes of validation under the 
Hospital IQR program from 45 days to 30 days. Details regarding that 
proposal can be found in the FY 2012 IPPS/LTCH PPS proposed rule 
scheduled for publication on May 5, 2011.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: A number of commenters expressed support for our proposal 
on data validation.
    Response: We thank the commenters for their input.
    Comment: Some commenters requested information on how the data 
validation processes for Hospital VBP would be run and, if issues 
regarding validation arose, how such problems would be addressed.
    Response: We interpret the comments to request more information on 
validation scoring, sample selection, medical record request deadlines, 
and measures included in the validation process. Details regarding the 
validation process that we have adopted for the FY 2013 Hospital IQR 
program, as well as the change that we recently proposed to adopt for 
that process, can be found in the FY 2011 IPPS/LTCH PPS final rule (75 
FR 50225 through 50230) and in the FY 2012 IPPS/LTCH PPS proposed rule 
scheduled for publication on May 5, 2011. The public section of the 
QualityNet Web site (http://www.qualitynet.org) also contains 
additional technical information about the validation process. As we 
stated in the Hospital Inpatient VBP Program proposed rule, we believe 
that using this process for both the Hospital IQR program and the 
Hospital VBP program will be 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 
or a subset of 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. The 
data validation for the proposed baseline period was completed at the 
end of January 2011.
    Comment: Some commenters suggested that CMS should conduct targeted 
validation, studying the overall accuracy of hospitals' calculation of 
measure performance rather than assessing accuracy of every data 
element.
    Response: As we explain in the FY 2011 IPPS/LTCH PPS Final Rule (75 
FR 50225 through 50230), the validation process we have adopted for the 
Hospital IQR Program uses every data element used to calculate chart 
abstracted quality measures to assess overall measure accuracy. We 
interpret the comment to request that we target hospitals for 
validation that have attained high measure rates, high performance 
scores, and/or a very high number of improvement points as part of 
their Hospital VBP total performance score calculation. We believe that 
targeting validation on the subset of hospitals achieving high 
performance scores and the highest performance score changes from 
previous performance periods would improve the data accuracy under the 
Hospital VBP program. We will consider this suggestion for future 
rulemaking.
    Comment: A commenter asked how we will validate data submitted from 
hospitals during the initial baseline period.
    Response: We interpret this comment to question our validation 
process for the FY 2013 proposed baseline period for chart abstracted 
clinical process of care measure data from July 1, 2009 to March 31, 
2010. We validated the Hospital IQR data for the 3rd calendar quarter 
2009 discharges using the validation process that we adopted in the FY 
2010 IPPS final rule (73 FR 43882 through 43889) for the FY 2011 
payment determination and for 1st calendar quarter 2010 discharges 
using the validation process that we adopted in the FY 2011 IPPS final 
rule (75 FR 50225 through 50229) for the FY 2012 payment determination. 
The 4th calendar quarter of 2009 was not among the quarters of data 
that were used for validation of the FY 2011 or FY 2012 payment 
determinations. Accordingly, we used the process that we adopted for 
the FY 2012 payment determination to validate data from this calendar 
quarter. We completed validation of these data in January 2011.
    Comment: A number of commenters suggested that we consider the 
impact of the ICD-10-CM/PCS reporting implementation on the Hospital 
VBP program, measure rates, and quality improvement efforts.
    Response: We interpret the comment to request additional 
information on the impact of ICD-10/CM/PCS implementation on Hospital 
VBP measure populations changing from ICD-9 codes to using ICD-10 
codes. While the change in codes used for measure calculation may have 
some impact on measure rates, this will not happen until the transition 
to ICD-10 on October 1, 2013. We have not modeled this impact on 
Hospital VBP measures using statistical analysis at the present time. 
We will closely monitor the impact of ICD-10 implementation on the 
Hospital VBP program measure achievement and improvement trends and 
consider this information in future rulemaking. We agree that this 
fundamental change in categorizing diagnoses and procedures could 
potentially impact Hospital VBP performance scores through changes in 
measure rates due to measure population definition changes and coding 
definition changes. Additional information regarding ICD-10 
implementation can be found at: http://www.cms.gov/ICD10.
    Comment: Some commenters argued that the proliferation of different 
electronic reporting requirements and programs and differing chart-
abstraction practices may result in inconsistent data collection by 
hospitals.
    Response: We appreciate the comment and understand that differences 
in abstraction practices and increased use of electronic health records 
may result in inconsistent interpretations of measure instructions 
among hospitals in terms of data collection. A principal goal of our 
validation requirement is to ensure consistency and accuracy in 
hospital reported measures. We currently validate the accuracy of 
chart-abstracted measure data reported for the Hospital IQR program 
and, as explained above, will use this validation process to

[[Page 26538]]

ensure the accuracy of the Hospital VBP chart-abstracted measure data.
    After considering the public comments, we are finalizing our 
proposal to use the validation process we use for the FY 2013 Hospital 
IQR program to ensure that data for the FY 2013 Hospital VBP program 
are accurate.

L. Additional Information

    1. Monitoring and Evaluation. As part of our ongoing effort to 
ensure that Medicare beneficiaries receive high-quality 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 us to 
address any disruptions in access or quality that may arise. These 
ongoing monitoring and evaluation efforts will be part of our larger 
efforts to promote improvements in quality and efficiency, both within 
CMS and between CMS and hospitals in 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 electronic health 
records (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)(iii) 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. All clinical quality measures selected for the EHR 
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. The final rule for the Medicare and 
Medicaid EHR Incentive Programs includes 15 clinical quality measures 
for eligible hospitals and critical access hospitals (75 FR 44418), two 
of which have been selected for the Hospital IQR program under section 
1886(b)(3)(B)(viii) of the Act for the FY 2014 payment determination 
(75 FR 50210 through 75 FR 50211).
    Thus, the Hospital IQR and Hospital VBP programs have important 
areas of overlap and synergy with respect to the EHR-based reporting of 
quality measures under the HITECH Act. We believe the financial 
incentives under the HITECH Act for the adoption and meaningful use of 
certified EHR technology by hospitals will encourage greater EHR-based 
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 final rule do not implicate or 
implement any HITECH statutory provisions. Those provisions are the 
subject of separate rulemaking and public comment.
    The comments we received on this proposal and our responses are set 
forth below.
    Comment: Many commenters expressed support or encouragement of EHR 
use for quality improvement efforts.
    Response: We thank commenters for their support.
    Comment: Some commenters argued that EHR use in hospitals does not 
mean that quality of care is improving.
    Response: We thank commenters for their input. We agree with 
commenters' point that possessing electronic health records alone does 
not constitute quality improvement. However, the criteria for 
``meaningful use'' certified EHR technology are intended to encourage 
actual improvements in medical care quality associated with health 
information technology rather than simple possession of new systems. As 
stated in the Hospital Inpatient VBP proposed rule (76 FR 2485), we 
believe that electronic reporting of measure information is a necessary 
step towards a more integrated health care system

[[Page 26539]]

and one we intend to encourage in future Hospital VBP rulemaking.
    Comment: Some commenters requested clarification on the interaction 
of the Hospital VBP program initiatives with the EHR incentive 
programs.
    Response: We appreciate the commenters' request. We are actively 
planning to synchronize the various reporting programs in order to 
ensure harmony amongst measures across various settings. We hope to 
have all measure data submitted via EHRs in the future.
    Comment: One commenter suggested that CMS ensure that value-based 
purchasing initiatives foster innovative, quality care with an adequate 
level of reimbursement for innovative medical technologies.
    Response: We thank the commenter for this observation and believe 
that the Hospital VBP program will drive high quality care for Medicare 
beneficiaries, including through the provision of innovative 
technologies and EHRs. As stated above, we will closely monitor the 
Hospital VBP program for effects on the provision of medical care and 
on changes to medical practices, including the appropriate use of 
medical technologies.
    Comment: Many commenters suggested that CMS coordinate with the 
Office of the National Coordinator for Health IT (ONC) so that quality 
reporting and value-based purchasing data can be collected from 
certified EHR technology and related health information systems rather 
than manually extracted from medical records and submitted through a 
CMS Web site. Many commenters suggested that the first steps in 
coordination between CMS and ONC should be to clarify the goals and 
harmonize the measure specifications between CMS quality reporting and 
value-based purchasing efforts and ``meaningful use.''
    Response: We believe that using the same specifications for 
similarly-constructed measures for ``meaningful use'' and value-based 
purchasing initiatives would reduce confusion from multiple overlapping 
measures, reduce the costs of developing measures and could potentially 
address the limitations of CMS data collection methods that impact the 
ability to risk-adjust measures and distinguish outcomes that are 
present on admission.
    We agree that data required for quality reporting and value-based 
purchasing should be collected primarily from certified EHR technology 
rather than manually extracted from medical records when at all 
possible. We believe that collecting and transmitting data in this 
fashion will, in the long term, reduce provider reporting burden, as 
well as improve the reliability of the data used for public reporting 
and value-based purchasing. In achieving this objective, we will 
continue to engage the ONC on a myriad of operational issues and 
challenges that will need to be addressed when aligning value-based 
purchasing and ``meaningful use,'' including harmonizing the 
specifications of overlapping measures between ``meaningful use'' and 
value-based purchasing programs and considering developing new policies 
to protect patient privacy when accessing EHR data.

M. QIO Quality Data Access

    In the proposed rule (76 FR 2485), we explained the various changes 
that have occurred since the QIO program regulations were first issued 
in 1985 (see 50 FR 15347, April 17, 1985). These include the 
significant technological changes that have occurred in the last 25 
years; the addition of new responsibilities performed by QIOs; changes 
in the way QIOs-- and CMS--conduct business; the establishment of new 
laws to protect data and information, including the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA) and the Federal 
Information Security and Management Act (FISMA); the need for improved 
transparency and focus on quality health care and patient safety; and 
the realization that CMS needs improved access to better manage and 
oversee the QIOs. We also noted that these same regulations govern data 
and information held by End Stage Renal Disease Networks in accordance 
with section 1881(c)(8) of the Act.
    In light of the above, we proposed several changes to the QIO 
regulations. Specifically, we proposed amending the definition of the 
QIO review system in Sec.  480.101(b) to include CMS; modifying Sec.  
480.130 to clarify the Department's general right to access non-QRS 
confidential and non-confidential information; removing the onsite 
limitation placed on CMS' access to QIO internal deliberations in Sec.  
480.139(a); and similarly modifying Sec.  480.140 to eliminate the 
onsite restriction to CMS' access to Quality Review study (QRS) data. 
We also proposed making corresponding changes in Sec.  422.153 to 
ensure consistency with Sec.  480.140. In addition, we asked for 
comments regarding whether the ``onsite'' restriction should be 
eliminated entirely from subparagraph (a) of section 480.140 so that 
other entities who already have access to this information can obtain 
it without going to the QIO's site. We also asked for comments on 
whether researchers should be allowed access to QIO information and the 
process, including criteria, which should be used to approve or deny 
these requests.
    The comments we received on these changes and our responses are set 
forth below.
    Comment: We received comments expressing concern that the changes 
to the QIO confidentiality regulations strip many of the 
confidentiality safeguards and go against Congress' original intent in 
establishing the confidentiality requirements contained in section 1160 
of the Social Security Act. These comments included concerns that 
making CMS part of the review system and providing CMS with access to 
confidential QIO deliberations and QRS information would make the 
information subject to the Freedom of Information Act (FOIA); would not 
provide ``adequate protection'' as required by section 1160; would 
violate other laws, such as the Health Insurance Portability and 
Accountability Act (HIPAA); and may result in patient, physician, and 
provider information being released much more broadly than Congress 
intended, including potential releases of information during discovery 
in civil proceedings. Other commenters believed that there could be 
serious unintended consequences for patients, physicians, and 
providers, including damage to professional reputations.
    Response: We thank the commenters for their concerns. While section 
1160 does provide a general framework for maintaining the 
confidentiality of data or information acquired by QIOs, the section 
gives the Secretary broad discretion on when disclosures are necessary 
and appropriate. Paragraph (a)(1) provides that disclosures can be made 
``to the extent that may be necessary to carry out the purposes of [the 
QIO statute], * * *'' Paragraph (a)(2) gives the Secretary authority to 
allow disclosures in such cases and under such circumstances as the 
Secretary provides for in regulations to assure the adequate protection 
of the rights and interests of patients, physicians and providers. As 
we discussed in the proposed rule, the initial regulatory framework was 
developed at a time when computers were in their infancy and the work 
of the QIOs was performed onsite at provider and physician facilities. 
However, as technology has advanced and the QIOs' workload has 
expanded, what was deemed ``adequate'' 25 years ago is no longer the 
case. CMS has

[[Page 26540]]

weighed the concerns of the commenters against the needs of the QIO 
program, as well as other benefits CMS will gain from these changes. We 
have determined that the benefits resulting from these changes are 
extremely important at this time. We believe that these changes are 
necessary to modernize the regulations to equate with the manner in 
which QIOs carry out their work. In addition, these changes take into 
account the increased focus on medical errors and patient safety, which 
continue to be a major focus of the QIO program and of CMS. These 
changes, particularly the expanded definition of ``QIO review system,'' 
acknowledge the key role CMS plays in quality improvement, including 
CMS' role in the Hospital Value Based Purchasing Program, the Hospital 
Inpatient Quality Reporting Program, and the Hospital Outpatient 
Quality Data Reporting Program. We also recognize that conveying 
additional kinds of QIO confidential information to CMS will result in 
the information being subject to the Freedom of Information Act (FOIA); 
however, protections remain within FOIA for protecting certain kinds of 
confidential information from further disclosure. In obtaining any 
information, CMS strives to adhere to all legal requirements, including 
those specified in HIPAA and in the Federal Information Security and 
Management Act (FISMA). Our goals are, among others, to achieve 
improved management and oversight of the QIO program and greater 
transparency of physician and provider care. We recognize that these 
goals must be accomplished while continuing to ensure that QIOs are 
able to effectively develop reliable methods for identifying medical 
errors and attain overall improvement in the quality of health care 
provided to patients.
    Comment: Several commenters expressed concerns regarding the 
negative impact the changes to the confidentiality regulations, and in 
particular CMS' expanded access to QIO information, could have on the 
QIO program. Some commenters suggested that the changes could place the 
entire QIO review process--and the QIO program--in jeopardy. Some 
believed that the changes are not in line with the original intent of 
the confidentiality provisions, which was to ensure ``frank and open 
communication'' and that the ability of the QIOs to attain quality 
improvement would be undermined. Others believed that the changes could 
create an environment where every discussion between the QIO and a 
provider or physician would take place in the presence of the 
provider's or practitioner's legal counsel in an attempt to ensure that 
the provider or practitioner does not reveal potentially damaging 
information. Still others believed the changes could result in 
attorneys using the QIO process as a ``screening'' tool, gaining access 
to QIO information to decide whether a lawsuit against an individual or 
entity identified in the information might be appropriate, or whether 
the information might bolster an existing suit. The commenters also 
mentioned that access to QIO information might subject QIO staff to a 
lawsuit when a jury's decision ultimately differs from that of the QIO. 
In addition, QIOs attempting to mediate and/or resolve concerns or 
complaints could see less willingness by beneficiaries, physicians, and 
providers to engage in these discussions in light of concerns that 
information and outcomes may become discoverable and that this could 
ultimately impact patient safety. In fact, at least one commenter 
suggested that providers and physicians could be less likely to 
participate in programs associated with other Federal agencies, such as 
the Center for Disease Control, and Prevention's work associated with 
Healthcare Acquired Infections. Concerns were also raised regarding the 
ability of QIOs to hire physician reviewers should the names of 
physician reviewers and their conclusions about the quality of care 
provided by other physicians and providers become discoverable and that 
this could drive up costs associated with hiring these physician 
reviewers.
    Response: QIOs perform numerous reviews through their contracts 
with CMS, including quality of care reviews, medical necessity reviews, 
readmission reviews, higher-weighted diagnosis related group reviews, 
appropriateness of settings reviews, admission reviews, as well as 
appeals of beneficiary discharges from a variety of provider settings. 
In carrying out these reviews, the QIOs rely on medical and other 
relevant information supplied by providers, physicians and 
beneficiaries, and these providers and physicians are required by law 
to provide QIOs with relevant information upon request. In fact, the 
QIO regulations at Sec.  480.130 already provide, without any 
amendments, that the Department of Health and Human Services (including 
CMS) has full access to all QIO confidential information--except 
information that qualifies as QRS data and internal deliberations. As 
such, we do not anticipate that QIO core review operations will be 
impacted in any significant way through the changes to the 
confidentiality regulations. Moreover, while reference was made to a 
potential negative impact on participation in other Federal programs, 
the exact nature of this impact was not clear and again, in light of 
the Department's existing access, we do not believe that the 
commenters' concern is likely. Quality Review Studies is the one area 
in which the changes could potentially have an impact on provider and 
physician participation; however, we do not believe that the changes 
will have the profound impact envisioned by these commenters. In light 
of CMS' role in paying claims and the substantial amount of claims data 
already in CMS' possession, requestors can already obtain certain 
information from CMS's Privacy Act Systems of Records related to 
providers and physicians from which conclusions about their performance 
could be gleaned. This is in addition to the performance information 
that is already made available on providers and physicians through the 
various quality reporting programs. CMS' goal is not to serve as the 
repository of all QIO data and information. We recognize that 
responsibility is best left to the QIOs, and we are cognizant of the 
concerns expressed by the commenters. To the extent that we are going 
to collect information that will be retrieved by an individual's 
personal identifier including name, social security number, etc., we 
will publish a CMS Privacy Act System of Record notice in the Federal 
Register. However, at this time we have not identified such a need. 
Additionally, CMS does not disclose patient identifiable data to third 
party FOIA requesters and will protect this information to the extent 
allowed by Federal law. As we have noted, one of our major goals is to 
improve the management and oversight of the QIOs. We do not intend to 
interfere in the relationships between the QIOs and physicians, 
providers, etc.
    Although providers and physicians could conceivably engage legal 
counsel, this does not appear likely, particularly given the nature of 
the review process as detailed below. Providers and physicians have 
always had the right to consult with their counsel but have not 
routinely enlisted such assistance. We believe that this is because of 
the QIOs' statutory right to medical information, which is normally 
maintained in the medical records. Moreover, while the impact of the 
changes will place more emphasis on information in CMS' possession, 
section 1157(b) of the QIO statute protects the QIO and its employees 
from being held to have violated a criminal law or be civilly

[[Page 26541]]

liable for performing its statutory and contractual responsibilities, 
provided due care was exercised. Additionally, while the changes 
provide CMS with the right to obtain more data off-site, they do not 
mandate that CMS receive every piece of information in the QIOs' 
possession, and we will make determinations regarding information 
needed in line with our stated goals, as articulated above. As such, we 
do not anticipate routinely obtaining the names of physician reviewers 
or other information associated with QIO deliberations unless that 
information is pertinent to a specific identifiable performance 
initiative.
    Comment: Some commenters expressed concern that there could be a 
lack of control over disclosures once confidential information is 
provided to other Federal and state agencies and that robust systems 
are needed to prevent inherent dangers associated with multiple ``hand-
offs'' of information from agency to agency so that the necessary level 
of responsibility and oversight is maintained and information is not 
lost, misused or inappropriately disclosed. In addition, a concern was 
raised that QIO information represents only a subset of all data and 
information and that CMS and other agencies must consider that the 
information does not represent the ``norm.'' In particular, commenters 
raised concerns that the expanded access to quality improvement review 
activity would allow CMS to use QIO data to determine new methodologies 
to reduce or deny payments for other initiatives, such as the expansion 
of the Recovery Audit Program.
    Response: We appreciate the comments regarding the need for 
internal controls related to information provided to other Federal and 
state agencies. However, QIOs already have the authority to release 
confidential information to Federal and state agencies in certain 
instances as defined by the QIO confidentiality regulations in Part 480 
(for example, the Office of Inspector General, Federal and State fraud 
and abuse agencies, and Federal and State agencies responsible for 
risks to the public health), and necessary controls are already in 
place to effectuate these provisions and ensure the data is 
appropriately protected. We believe that any additional controls 
associated with the potential increased access by Federal and state 
agencies can be handled through the development of additional program 
instructions and policy statements. Moreover, CMS already has a well-
defined process in place to ensure protection of various types of 
information, including limited data sets, identifiable data, and claims 
data in general, and this includes adherence to specific information 
technology requirements, as well as HIPAA and FISMA. As we have noted, 
our goal in expanding the access is, in part, to ensure appropriate 
oversight and management of the QIO program. However, we recognize that 
access to this information could have additional benefits and improve 
our understanding of payment related problems. This includes the 
ability to use QIO data to determine new methodologies to reduce or 
deny payments for other initiatives, such as recovery audits. In 
utilizing the data, we also recognize that careful analysis will need 
to be conducted to ensure that the scope of the data is clearly 
recognized so that inaccurate conclusions are not drawn based on the 
particular ``subset'' of data being used.
    Comment: We received comments advising that making confidential QIO 
information available to researchers would undermine the QIO program 
and could drive Hospitals to cease participating in QIO activities. 
Some commenters recognized that while sharing this data may be 
beneficial and increase opportunities for improvement within our health 
care systems, the data and process for obtaining the data could be 
easily mismanaged if well-defined parameters are not put into place for 
approving these requests, including the establishment of detailed 
criteria that ensures the research has value to CMS' and is in line 
with CMS' goals, and that the research be conducted by credible 
research entities. Still others commented that QIOs should share only 
aggregate level data or de-identified data and that rigorous assurances 
and safeguards be put in place to ensure patient privacy and 
confidentiality.
    Response: We appreciate the comments and suggestions regarding the 
release of information to researchers. As discussed previously, QIOs 
perform numerous reviews through their contracts with CMS, including 
quality of care reviews, medical necessity reviews, readmission 
reviews, higher-weighted diagnosis related group reviews, 
appropriateness of settings reviews, admission reviews, as well as 
appeals of beneficiary discharges from a variety of provider settings. 
In carrying out these reviews, the QIOs rely on medical and other 
relevant information supplied by Medicare providers, physicians and 
beneficiaries, and these providers and physicians are required by law 
to provide QIOs with medical and other relevant information upon 
request. As such, we do not anticipate that most QIO core review 
operations will be negatively impacted through the changes to the 
confidentiality regulations. As previously mentioned, although there 
could be some potential impact on participation in Quality Review 
Studies, our hope is that the focus will remain on the patients and the 
quality improvements that can be achieved through these studies. 
Additionally, the potential benefits attained through the efforts of 
researchers are significant, particularly as we aim to improve patient 
safety by reducing medical errors. We recognize that these requests 
should be thoroughly evaluated, with the release of information based 
on well-defined criteria. CMS already employs the CMS Privacy Board to 
review researchers' requests for CMS claims data. The Board reviews the 
request, and ensures that the request would comply with applicable 
privacy and security laws and CMS policies governing data disclosure. 
Only after an affirmative finding is the data released to the 
researcher. We believe that we should use the CMS Privacy Board to 
process research requests for QIO data as well. After consideration of 
the public comments, we have added Sec.  480.144 to allow CMS to 
approve requests from researchers for access to QIO confidential 
information.
    Furthermore, even after the Board determines that the disclosure 
would comply with applicable laws and CMS' policies, data is only 
released upon execution of a data use agreement (DUA). These agreements 
spell out the expectations on data transmission, storage, access, use, 
re-use and disclosure to downstream entities. CMS conditions research 
data disclosures on the researchers' acceptance of these terms. DUAs 
therefore provide ongoing protection of the data after it is released.
    Moreover, in order to fully leverage the capabilities of these 
researchers, it is imperative that full access be given in those 
situations in which the CMS Privacy Board deems warranted. Our goal 
will be to develop sub-regulatory requirements, including any 
additional criteria and requirements necessary to properly evaluate 
these requests to coincide with the effectuation of this Final Rule.
    Comment: We received comments in support of CMS's proposed changes 
to the regulations governing QIOs, including those providing CMS with 
broader access to QIO data and the deletion of the ``onsite'' 
requirement for CMS and other Federal and state agencies having the 
right to access the data. These commenters believed that any entity 
that is entitled to have access to QIO information should be able to 
get the information without going onsite to

[[Page 26542]]

the QIO. The commenters considered the technological advances since 
1985 considerable and that new Federal legislation, including HIPAA and 
FISMA, have made the ``on-site'' requirement obsolete. Others supported 
making CMS an identified part of the definition of a ``QIO review 
system'' because this would assist CMS in becoming more efficient in 
exchanging data and enable CMS to better manage and respond to new 
information. These comments also supported CMS' modification of Sec.  
480.139 and Sec.  480.140 to facilitate CMS' communication with, and 
awareness of, QIO activities needed to improve the proper oversight and 
management of QIOs and the timely access to information.
    Response: We thank these commenters for the support. The changes 
are designed to improve our oversight and management of the QIOs while 
also better utilizing available data to oversee patient care, and where 
feasible the Medicare program. We see the recognition of CMS' role in 
the QIO review system as an important step towards achieving this goal. 
Moreover, as we conveyed in the Hospital Inpatient VBP Program proposed 
rule, 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 the elimination of the 
restriction that data can only be accessed onsite at the QIO by CMS in 
sections 480.139 and 480.140. For the same reasons, we believe that the 
onsite restriction should be eliminated for all Federal and state 
agencies having access to QIO data as specified in section 480.140. In 
implementing these changes and allowing improved access to this 
information, CMS will ensure adherence to all legal requirements, 
including HIPAA and FISMA, and we will establish policies and 
procedures to ensure appropriate protections are in place in response 
to the deletion of the onsite requirement from sections 480.139 and 
480.140.
    Comment: We received several comments in support of giving 
researchers access to QIO confidential information. Many believed this 
access would enable researchers to study quality issues and obtain 
needed insights into ways health care quality could be improved. 
Commenters also supported leveraging the current CMS Privacy Board 
structure to evaluate these requests. Others suggested that the process 
for accessing QIO data be given free of lengthy delays or cumbersome 
process requirements for approval of these requests. It was also 
suggested that an expedited process be created that would grant 
individual QIOs with the authority to independently assess and release 
information, would incorporate tightly managed data use agreements and 
would also allow requestors to appeal declinations to the CMS Privacy 
Board. Alternatively, comments were received suggesting that CMS 
utilize a review process similar to ``investigational review boards'' 
or the ``Limited Data Set Date process.''
    Response: We appreciate these comments and agree with the positive 
insights that could be attained by allowing researcher access to QIO 
data as well as the benefits of using the already established CMS 
Privacy Board. Although we have considered other options for evaluating 
these requests, we believe that using the existing CMS Privacy Board 
gives us the best opportunity to ensure that all requests are 
appropriately evaluated in a timely fashion. As necessary, we will 
consider potential modifications to the specific criteria and processes 
employed by the CMS Privacy Board should circumstances warrant such 
changes. Moreover, with regard to the suggestion that QIOs be used to 
evaluate these requests, we believe that this would create a 
substantial workload burden for QIOs and could potentially result in 
different decisions on similar requests, along with the potential for 
``forum-shopping'' for those who have had their requests denied by 
individual QIOs. While we recognize that other models may exist to 
evaluate these data requests, we believe the use of the CMS Privacy 
Board represents the best opportunity to ensure requests are properly 
and uniformly adjudicated, without placing an undue burden on 
individual QIOs.
    Comment: One commenter requested a change to the QIO 
confidentiality regulations related to the right of an attending 
physician to unilaterally decide not to release individual case review 
results to beneficiaries if the attending physician determines the 
results could ``harm'' the beneficiary. The commenter suggested that 
the regulatory requirement be changed to allow providers to comment on 
these determinations and that the QIO ``finding'' be available to the 
beneficiary in all circumstances and that these changes are important 
for improvements to the patient, physician and provider relationships.
    Response: While we appreciate this suggestion, we believe that it 
is outside the scope of this Final Rule. As such, we are not taking any 
action at this time. However, we reserve the right to consider this 
issue in future rulemaking.
    After consideration of the public comments, we are finalizing the 
proposed changes to the QIO program regulations. In addition, we are 
eliminating the ``onsite'' restriction on Quality Review Study 
information in Sec.  480.140(a) so that all of the entities and 
individuals listed in that provision are no longer subject to it. We 
are also establishing regulations governing the ability of researchers 
to request access to QIO confidential information.

III. Collection of Information Requirements

    We will submit a revised information collection and recordkeeping 
requirements to incorporate CMS access of information from QIOs. CMS 
intends to modify existing information collection requirements approved 
on behalf of the Hospital IQR program data collection (OMB 0938-1022) 
and supporting the Hospital Value Based Purchasing Program, and the QIO 
quality of care complaint form (OMB 0938-1102) to QIO program 
confidentiality regulation modification. We estimate that the 53 QIOs 
will each require approximately 120 hours per QIO per year to modify 
information technology systems necessary to grant CMS access to the 
requested information, or a total of 6,360 burden hours per year. We 
believe that no additional information will be collected from providers 
and Beneficiaries as a result of this information collection.

IV. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), 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 Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of

[[Page 26543]]

quantifying both costs and benefits, of reducing costs, of harmonizing 
rules, and of promoting flexibility. This rule has been designated an 
``economically'' significant rule, under section 3(f)(1) of Executive 
Order 12866, and a major rule under the Congressional Review Act. 
Accordingly, the rule has been reviewed by the Office of Management and 
Budget.
2. 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 will accomplish these goals by providing 
incentive payments based on hospital performance on measures. This 
final 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 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.
3. Summary of Impacts
    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 payment amount'' in 
future rulemaking. For purposes of this final 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), as estimated 
by the Secretary, resulting in a net budget-neutral impact. Overall, 
the distributive impact of this final rule is estimated at $850 million 
for FY 2013.
    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 will accomplish these goals by providing 
incentive payments based on hospital performance on measures. This 
final 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 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.
4. Detailed Economic Analysis
    Table 10 displays our analysis of the distribution of possible 
total performance scores based on 2009 data, providing information on 
the estimated impact of this final rule. Value-based incentive payments 
for the estimated 3,092 hospitals that would participate 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, row 8 of Table 10 
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.

                Table 10--Two-Domain Impact (Clinical Process and HCAHPS): Estimated Incentive Rates by Hospital Characteristic [dagger]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                              Percentile
               Hospital characteristic                --------------------------------------------------------------------------------------------------
                                                       N = 3,092     Mean       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

[[Page 26544]]

 
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
--------------------------------------------------------------------------------------------------------------------------------------------------------
[dagger] Note: Because sufficient 2009 data was not available at the time of publication of this final 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.

    Table 11 below shows the estimated percent distribution by hospital 
characteristic of the 1 percent reduction ($850 million) in the base 
operating DRG payment for fiscal year 2013.

 Table 11--Average Estimated Percentage Withhold Amount (as Required by
       Section 1886(o)(7) of the Social Security Act) by Hospital
                             Characteristic
------------------------------------------------------------------------
                                                            Estimated
       Hospital characteristic            N = 3,092     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 12. 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). 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 12--Projected Number of Hospitals Not Receiving a Hospital VBP
              Score in FY 2013, by Hospital Characteristic
------------------------------------------------------------------------
                                                            Number of
                                                          hospitals not
                                                            receiving
                Hospital characteristic                    hospital VBP
                                                           score  (N =
                                                               353)
------------------------------------------------------------------------
Region:
  New England..........................................                6

[[Page 26545]]

 
  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.
5. Alternatives Considered
    The major alternative performance scoring models considered for 
this final rule were the Six-Domain Performance Scoring Model and the 
Appropriate Care Model, and both of these models were discussed at 
length in the proposed rule (76 FR 2476 through 2478).
    The Appropriate Care Model (ACM) creates sub-domains by topic for 
the clinical process of care measures and is distinguished from the 
Three-Domain Performance Scoring Model 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 is 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.
    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. We would assign intermediate scores to each 
hospital for each of the clinical process sub-domains. Like the Three-
Domain Performance Scoring Model, hospitals would be scored on each 
measure in the sub-domain and individual measures 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.
    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.
6. 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 final 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 budget-neutral impact. Overall, the distributive 
impacts of this final rule, resulting from the incentive payments and 
the 1 percent 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 13--Accounting Statement: Classification of Estimated Expenditures
                               for FY 2013
------------------------------------------------------------------------
           Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized           $0 (Distributive impacts resulting from
 Transfers.                     the incentive payments and the 1 percent
                                reduction (withhold) in the base
                                operating DRG payment are estimated at
                                $850 million.)
From Whom To Whom?...........  Federal Government to Hospitals.
------------------------------------------------------------------------

B. Regulatory Flexibility Act Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that the 
great majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the SBA definition of a small business having revenues of 
$7.0 million to $34.5 million or less in any 1 year. For purposes of 
the RFA, among the 3,092 hospitals that would be participating in the 
Hospital VBP program, we estimate that percent increases in payments 
resulting from this final rule will range from 0.0236 percent for the 
lowest-scoring hospital to 1.817 percent for the highest-scoring 
hospital. When the reduction to base operating DRG payments required 
under section 1886(o)(7) (one percent in FY 2013, gradually rising to 2 
percent by FY 2017) 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 total Medicare 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

[[Page 26546]]

not preparing an analysis under the RFA because the Secretary has 
determined that this final 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 604 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 did not prepare an analysis under section 
1102(b) of the Act because the Secretary has determined that this final 
rule would not have a significant impact on the operations of a 
substantial number of small rural hospitals.
    Comment: One commenter disagreed with our analysis, which concluded 
that the proposed rule will not have an impact on a substantial number 
of small, rural hospitals. The commenter argued that quality 
improvement efforts are more costly for small hospitals and was also 
concerned about the program's reliability in low volume situations.
    Response: As discussed throughout the various sections of this 
Regulatory Impact Analysis, including the discussions of the RFA and 
section 1102(b), and based on the concluding economic impact findings 
and tables presented, we believe there will not be a significant impact 
on the operations of a substantial number of small rural hospitals. 
Absent any new data, commenters may reference the upcoming 
demonstration projects such as those required under section 3001(b) of 
the Affordable Care Act as a tool for better understanding any new 
economic impacts, including those of small rural hospitals. As 
described in section II. G. of this Final Rule, we believe that the 
measure and case minimums allow us to include as many hospitals as 
possible while calculating reliable Total Performance Scores.
    Comment: Another commenter asked for more detail in Table 10, 
including data to offer a rationale for the incentive rates identified. 
This commenter stated that the ``weights have not been defined or 
modeled within the rule to allow hospitals to make projections with 
budgeting and other operational issues.'' This commenter recommended 
that CMS provide additional information so that hospitals can replicate 
the process and calculations for planning purposes.
    Response: We believe the data on the two-domain impact of the 
Hospital VBP program provided in Table 10 are as detailed as possible, 
along with the accompanying narrative and analysis provide a 
description of the number of affected entities and the size of the 
economic impacts of this final rule, as well as the justification for 
the Secretary's certification that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
We will take the commenter's suggestions for providing additional data 
under advisement should additional or more detailed data become 
available and as we continue public outreach and education efforts for 
the Hospital VBP program.

C. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 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 2011, that 
threshold is approximately $136 million. This rule would not mandate 
any requirements for State, local, or tribal governments, nor would it 
affect private sector costs.

V. Federalism Analysis

    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.

List of Subjects

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health 
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 amends 42 CFR chapter IV as set forth below:

PART 422--MEDICARE ADVANTAGE PROGRAM

0
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

0
2. Section 422.153 is revised to read as follows:


Sec.  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 Sec.  
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

0
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)

0
4. Section 480.101(b) is amended by revising the definition of ``QIO 
review system'' to read as follows:


Sec.  480.101  Scope and definitions.

* * * * *
    (b) * * *
    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;

[[Page 26547]]

    (3) Health care institutions and practitioners whose services are 
reviewed;
    (4) QIO reviewers and supporting staff;
    (5) Data support organizations; and
    (6) CMS.
* * * * *

0
5. Section 480.130 is revised to read as follows:


Sec.  480.130  Disclosure to the Department.

    Except as limited by Sec.  480.139(a) and Sec.  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.

0
6. Section 480.139 is amended by revising paragraph (a)(1) to read as 
follows:


Sec.  480.139  Disclosure of QIO deliberations and decisions.

    (a) * * *
    (1) A QIO must not disclose its deliberations except to--
    (i) CMS; or
    (ii) The Office of the Inspector General, and the Government 
Accountability Office as necessary to carry out statutory 
responsibilities.
* * * * *

0
7. Section 480.140 is amended by revising paragraphs (a) introductory 
text, (a)(1) and paragraph (g) to read as follows:


Sec.  480.140  Disclosure of quality review study information.

    (a) A QIO must disclose quality review study information with 
identifiers of patients, practitioners or institutions to--
    (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.

0
8. Section 480.144 is added to read as follows:


Sec.  480.144  Access to QIO Data and Information.

    CMS may approve the requests of researchers for access to QIO 
confidential information not already authorized by other provisions in 
42 CFR part 480.

    Authority:  Catalog of Federal Domestic Assistance Program No. 
93.773, Medicare--Hospital Insurance; and Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program.

    Dated: April 14, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 26, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-10568 Filed 4-29-11; 8:45 am]
BILLING CODE 4120-01-P