Perhaps the best known of the programs under the law that will pay for performance are accountable care organizations (ACOs)–groups of providers that agree to coordinate care and to be held accountable for the quality and costs of the services they provide. (See the Health Policy Brief published on January 31, 2012, for more information on Medicare ACO demonstration projects.) Three other programs are described below.

Value-based purchasing. The Affordable Care Act also expands pay-for-performance efforts in hospitals by establishing a Hospital Value-Based Purchasing Program. Starting October 1, 2012, hospitals will be rewarded for how well they perform on a set of quality measures as well as on how much they improve in performance relative to a baseline. The better a hospital does on its quality measures, the greater the reward it will receive. The law also requires CMS to develop value-based purchasing programs for home health agencies; skilled nursing facilities; ambulatory surgical centers; specialty hospitals, such as long-term care facilities; and hospice programs.

Physician quality reporting. The health care law also extends through 2014 the Medicare Physician Quality Reporting System that provides financial incentives to physicians for reporting quality data to CMS. Beginning in 2015 the incentive payments will be eliminated, and physicians who do not satisfactorily report quality data will see their payments from Medicare reduced. (See the Health Policy Brief published on March 8, 2012, for more information on public reporting of quality and costs.)

Medicare Advantage plan bonuses. The Affordable Care Act also provides for bonus payments to Medicare Advantage plans that achieve at least a four-star rating on a five-star quality rating scale, beginning in 2012. In November 2010 CMS announced that it would replace this provision with a demonstration project in which bonus payments would be awarded to Medicare Advantage plans that have at least an average of three stars and would increase the size of bonuses for plans with four or more stars.

New payment systems reward doctors and hospitals for improving the quality of care, but studies to date show mixed results. One thing that is for sure though – healthcare in the United States is changing quickly, and practitioners need to be acutely aware and prepared for these reimbursement changes.

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