{"id":179,"date":"2021-08-17T13:38:06","date_gmt":"2021-08-17T13:38:06","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/accnursing2030\/chapter\/8-4-healthcare-reimbursement-models\/"},"modified":"2025-02-18T18:43:02","modified_gmt":"2025-02-18T18:43:02","slug":"8-4-healthcare-reimbursement-models","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/accnursing2030\/chapter\/8-4-healthcare-reimbursement-models\/","title":{"raw":"8.4 Health Care Reimbursement Models","rendered":"8.4 Health Care Reimbursement Models"},"content":{"raw":"As discussed in the previous section, hospitals and health care providers are paid for services provided to individuals by government insurance programs (such as Medicare and Medicaid), private insurance companies, or people using their out-of-pocket funds. Traditionally, health care institutions were paid based on a \u201cfee-for-service\u201d model. For example, if a client was admitted to a hospital with pneumonia, the hospital billed that individual's insurance program for the cost of care.\n\nHowever, as part of a recent national strategy to reduce health care costs, insurance providers have transitioned to \"Pay for Performance\" reimbursement models that are based on overall agency performance and client outcomes.\n

Pay for Performance<\/h3>\n[pb_glossary id=\"395\"]Pay for Performance[\/pb_glossary]<\/strong>, also known as value-based payment, refers to reimbursement models that attach financial incentives to the performance of health care agencies and providers. Pay for Performance models tie higher reimbursement payments to positive client outcomes, best practices, and client satisfaction, thus aligning payment with value and quality.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]<\/sup> Nurses support higher reimbursement levels to their employers based on their documentation related to nursing care plans and achievement of expected client outcomes.\n\nThere are two Pay for Performance models. The first model rewards hospitals and providers with higher reimbursement payments based on how well they perform on process, quality, and efficiency measures. The second model penalizes hospitals and providers for subpar performance by reducing reimbursement amounts.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]<\/sup> For example, Medicare no longer reimburses hospitals to treat clients who acquire certain preventable conditions during their hospital stay, such as pressure injuries or urinary tract infections associated with use of catheters.[footnote]James, J. (2012, October 11). Pay-for-performance.<\/em> Health Affairs. https:\/\/www.healthaffairs.org\/do\/10.1377\/hpb20121011.90233\/full\/<\/a>[\/footnote]<\/sup>\n\nThe Centers for Medicare and Medicaid Services (CMS), spurred by the Affordable Care Act, has led the way in value-based payment with a variety of payment models. CMS is the largest health care funder in the United States with almost 40% of overall health care spending for Medicare and Medicaid. CMS developed three Pay for Performance models that impact hospitals\u2019 reimbursement by Medicare. These models are called the Hospital Value-Based Purchasing Program, the Hospital Readmissions Reduction Program, and the Hospital-Acquired Condition Reduction Program. Private insurers are also committed to performance-based payment models. In 2017 Forbes<\/em> reported that almost 50% of insurers\u2019 reimbursements were in the form of value-based care models.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]<\/sup>\n

Hospital Value-Based Purchasing Program<\/h4>\nThe Hospital Value-Based Purchasing Program (VBP) was designed to improve health care quality and client experience by using financial incentives that encourage hospitals to follow established best clinical practices and improve client satisfaction scores via client satisfaction surveys. Reimbursement is based on hospital performance on measures divided into four quality domains: safety, clinical care, efficiency and cost reduction, and client and caregiver-centered experience.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]\u00a0<\/sup>The VBP program rewards hospitals based on the quality of care provided to Medicare clients and not just the quantity of services that are provided. Hospitals may have their Medicaid payments reduced by up to 2% if not meeting the quality metrics.\n
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Read more about client satisfaction surveys<\/a>.<\/p>\n\n<\/div>\n

Hospital Readmissions Reduction Program<\/h4>\nThe Hospital Readmissions Reduction Program (HRRP) penalizes hospitals with higher rates of client readmissions compared to other hospitals. HRRP was established by the Affordable Care Act and applies to clients with specific conditions, such as heart attacks, heart failure, pneumonia, chronic obstructive pulmonary disease (COPD), hip or knee replacements, and coronary bypass surgery. Hospitals with poor performance receive a 3% reduction of their Medicare payments. However, it was discovered that hospitals with higher proportions of low-income clients were penalized the most, so Congress passed legislation in 2019 that divided hospitals into groups for comparison based on the socioeconomic status of their client populations.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]<\/sup>\n

Hospital-Acquired Condition Reduction Program<\/h4>\nThe Hospital-Acquired Condition Reduction Program (HACRP) was established by the Affordable Care Act. This Pay for Performance model reduces payments to hospitals based on poor performance regarding client safety and hospital-acquired conditions, such as surgical site infections, hip fractures resulting from falls, and pressure injuries. This model has saved Medicare approximately $350 million per year.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]<\/sup>\n\nThe HACRP model measures the incidence of hospital-acquired conditions, including central line-associated bloodstream infections (CLABSI), catheter-associated urinary tract infections (CAUTI), surgical site infections (SSI), Methicillin-Resistant Staphylococcus Aureus<\/em> (MRSA), and Clostridium Difficile<\/em> (C. diff).[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]<\/sup> As a result, nurses have seen changes in daily practices based on evidence-based practices related to these conditions. For example, stringent documentation is now required for clients with Foley catheters that indicates continued need and associated infection control measures.\n

Other CMS Pay for Performance Models<\/h4>\nCMS has created other value-based payment programs for agencies other than hospitals, including the End-Stage Renal Disease (ESRD) Quality Initiative Program, the Skilled Nursing Facility Value-Based Program (SNFVBP), the Home Health Value-Based Program (HHVBP), and the Value Modifier (VM) Program. The VM program is aimed at Medicare Part B providers who receive high, average, or low ratings based on quality and cost measurements as compared to peer agencies.\n

Impacts of Value-Based Payment<\/h3>\nPay for Performance (i.e., value-based payment) stresses quality over quantity of care and allows health care payers to use reimbursement to encourage best clinical practices and promote positive health outcomes. It focuses on transparency by using metrics that are publicly reported, thus incentivizing organizations to protect and strengthen their reputations. In this manner, Pay for Performance models encourage accountability and consumer-informed choice.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote] <\/sup>See Figure 8.8[footnote]\u201cPillars of Pay Performance.png\u201d by Meredith Pomietlo for Chippewa Valley Technical College<\/a> is licensed under CC BY 4.0<\/a>[\/footnote]<\/sup> for an illustration of Pay for Performance.\n\n[caption id=\"attachment_178\" align=\"aligncenter\" width=\"740\"]\"Illustration Figure 8.8 Pay for Performance[\/caption]\n\nPay for Performance models have reduced health care costs and decreased the incidence of poor client outcomes. For example, 30-day hospital readmission rates have been falling since 2012, indicating HRRP and HACRP are having an impact.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote]<\/sup>\n\nHowever, there are also disadvantages to value-based payment. As previously discussed, initial research indicated hospitals with higher proportions of low-income clients were being penalized the most, resulting in additional legislation to compare hospital performance in groups based on their clients\u2019 socioeconomic status. Nursing leaders continue to emphasize strategies that further address social determinants of health and promote health equity.[footnote]Pay for Performance. (2018). NEJM catalyst<\/em>. https:\/\/catalyst.nejm.org\/doi\/full\/10.1056\/CAT.18.0245<\/a>[\/footnote] <\/sup>Read more about equity and social determinants of health in the following subsection.\n

Nursing Considerations<\/h3>\nNurses have a direct impact on activities related to quality care and reimbursement rates received by their employer. There are several categories of actions nurses can take to improve quality client care, reduce costs, and improve reimbursement. By incorporating these actions into their daily care, nurses can help ensure the funding they need to provide quality client care is received by their employer and resources are allocated appropriately to their clients.\n\nThe following categories of actions to improve quality of care are based on the Institute of Medicine (IOM) report To Err Is Human: Building a Safer Health Care System and Crossing the Quality Chasm<\/em>[footnote]Avalere Health LLC. (2015). Optimal nurse staffing to improve quality of care and patient outcomes: Executive summary<\/em> [White paper]. https:\/\/cdn2.hubspot.net\/hubfs\/4850206\/ANA\/NurseStaffingWhitePaper_Final.pdf?__hstc=53609399.b25284991e95c5d4f1c55a49e826489f.1612299494138.1628353446072.1628356381954.16&__hssc=53609399.3.1628356381954&__hsfp=1865500357<\/a>[\/footnote]<\/sup>:\n