Hospital value-based purchasing

On October 1, 2012, the Centers for Medicare and Medicaid Services (CMS) began the Hospital Value-Based Purchasing (VBP) Program to incentivize quality performance by hospitals.

Certain documentation and coding criteria have the potential to significantly impact hospitals' VBP scores now, and as the program expands in upcoming years. Hospitalists, in particular, need to document the necessary information precisely to maximize this revenue opportunity for their hospitals. In 2015, a program of VBP in physician payments begins, for which similar criteria will be applied.

Art by Thinkstock
Art by Thinkstock.

The VBP incentive payments are based on a hospital's VBP score, which consists of measures of clinical process of care (weighted 70%) and patient experience of care (weighted 30%)—see Table 1 and Table 2 for specifics. While funding for this program comes from Medicare diagnosis-related group (DRG) revenue, the VBP measures track all patients, not just Medicare beneficiaries. The VBP is funded in 2013 by a 1% reduction in DRG payments for all hospitals, which will be redistributed according to VBP score. The VBP fund contribution is expected to increase to 2% or more by 2017.

Starting October 1, 2013, CMS is adding outcome measures to the VBP calculation: 30-day risk-adjusted mortality for acute myocardial infarction (AMI), congestive heart failure (CHF) and pneumonia. These VBP outcome measures complement an existing program, the Hospital Readmissions Reduction Program (HRRP), in existence since October 1, 2012, which penalizes hospitals for excess readmission rates for AMI, CHF and pneumonia. Hospital-specific VBP and HRRP data will be publicly available on the Medicare Hospital Compare website.

How does physician documentation affect the hospital's VBP score? As Table 1 shows, the clinical process-of-care measures are almost all therapeutic, not diagnostic, criteria. However, diagnostic precision is critical in defining the pneumonia and AMI populations. Inattention to the diagnostic standards for these conditions could result in a hospital scoring poorly on VBP performance. In addition, the excess readmission penalty (HRRP) requires that physicians carefully consider and exactingly document the precise reason for readmission of any patient previously hospitalized for AMI, CHF or pneumonia within the past 30 days.


In addition to performing blood cultures in the emergency department prior to administration of antibiotics, the VBP pneumonia measure requires the correct initial antibiotic selection indicated for community-acquired pneumonia (CAP). These include: (1) β-lactam (e.g., ceftriaxone); (2) quinolone (e.g. levofloxacin); (3) macrolide (e.g. azithromycin) and/or (4) doxycycline. Therefore, if a patient receives broad-spectrum anti-staphylococcus or gram-negative antibiotics and the only diagnosis is unspecified pneumonia or CAP, the antibiotic selection will be incorrect, resulting in a quality of care deficiency for both the hospital and the physician.

However, patients diagnosed with health care-associated pneumonia (HCAP) are excluded from the analysis, since the recommended standard of care requires selection of one or more antibiotics with broad-spectrum activity against gram-negative organisms and/or staphylococcus. Therefore, documentation of the diagnosis of HCAP for all patients meeting the HCAP criteria (see Table 3) and treatment with the indicated antibiotics are very important.

Furthermore, for accurate severity of illness classification and correct DRG assignment, the probable, likely or suspected organism(s) for which HCAP antibiotics are being administered must also be documented (see this column in May 2011 ACP Hospitalist). Failure to document this will also result in poor quality-of-care scores and reduction in hospital revenue. To ensure sufficient documentation, diagnostic statements like the following might be appropriate:

  • “HCAP possibly due to gram-negatives or staph”
  • “Suspected gram-negative HCAP”

Statements such as “at risk for” or “coverage for” are insufficient to confirm the connection between HCAP and the possible, likely, or suspected organism(s) causing it. In contrast to outpatient services, the use of the qualifying adjectives “possible,” “probable,” “likely” and “suspected” are encouraged for more precise inpatient documentation of diagnoses when there are reasonable clinical grounds and the indicated management is provided.

Do not diagnose HCAP unless the circumstances are consistent with the recognized HCAP criteria, and remember that the appropriate, indicated antibiotics must be administered for HCAP and whenever gram-negative organisms and/or staph are mentioned as a likely cause.


The AMI clinical process of care measures includes only patients with ST-elevation MI (STEMI) who received fibrinolytic therapy or underwent percutaneous coronary intervention (PCI). Therefore, it's necessary to clearly identify and distinguish non-STEMI (NSTEMI) from STEMI in all cases of myocardial infarction. While unrelated to VBP, specific documentation of NSTEMI for patients with acute coronary syndrome and elevated troponin levels is also essential for correct DRG assignment and hospital reimbursement when the aggressive recommended treatment of NSTEMI is provided.

In summary, diagnostic precision for all conditions is desirable, and particularly necessary for the correct classification, risk adjustment, severity of illness and quality of care reporting of patients admitted with pneumonia and AMI. Give careful consideration to the documentation of the specific conditions and reasons for readmission of patients previously admitted for AMI, CHF and pneumonia within the past 30 days. Remember that the revenue implications are profound. Always employ the recommended evidence-based management approach when diagnosing these conditions.