The Value-Based Purchasing Program and the “Immediate Jeopardy” Exclusion

This post is adapted from an article in the April 2012 issue of Dennis Barry’s Reimbursement Advisor. Christina Gonzalez is an attorney in the Houston office of King & Spalding.

The value-based purchasing (VBP) program is part of the Centers for Medicare and Medicaid Services’ (CMS) effort to be an “active purchaser of quality health care for its beneficiaries” [76 Fed. Reg. 26490, 26491 (May 6, 2011)]. Effective with discharges on or after October 1, 2012, CMS will begin making “incentive” payments to hospitals based on their performance on certain quality measures. Detailed discussions of the VBP program may be found in the March and July 2011 issues of this newsletter.

Impact of Immediate Jeopardy Findings. Pursuant to Section 1886(o)(1)(C) of the Social Security Act, the VBP program applies to “subsection (d) hospitals,” i.e., acute care hospitals paid under the hospital inpatient prospective payment system. Certain hospitals are statutorily excluded from the VBP program for a fiscal period, including a hospital “for which, during the performance period for such fiscal year, the Secretary has cited deficiencies that pose immediate jeopardy to the health or safety of patients.”

A hospital excluded from the VBP program “will be exempt from the base operating DRG payment reduction … as well as the possibility for value-based incentive payments” [76 Fed. Reg. 26529]. In the VBP final rule, CMS repeated its proposal to interpret the exclusion 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” [76 Fed. Reg. 26528].

Many hospitals have sought (and still seek) CMS guidance on the “immediate jeopardy” exclusion since the proposed VBP program rule was published, especially given that current Medicare regulations provide no means to appeal “immediate jeopardy” findings that do not result in termination from the Medicare program.

Appeal of Immediate Jeopardy Findings. A provider has the right to appeal certain actions that are considered to constitute an “initial determination” by CMS. Initial determinations include whether a prospective provider qualifies as a provider, whether a prospective department of a provider qualifies as provider-based, and whether a provider should be terminated because it no longer meets the conditions of participation [ 42 C.F.R. §498.3(b) ]. Section 498.3(d) lists actions that are not considered to be “initial determinations” for purposes of administrative appeal rights. That list (which is not exhaustive) includes both:

• The finding that a provider determined to be in compliance with the conditions of participation has deficiencies, and

• The finding that a hospital accredited by Joint Commission is not in compliance with a Medicare condition of participation.

In other words, a provider must actually be terminated from the Medicare program in order to have the right to challenge the deficiencies that resulted in the termination. A hospital could receive an “immediate jeopardy” finding based on cited deficiencies and correct those deficiencies to remain a provider in the Medicare program but still be ineligible for the VBP program for a fiscal year with no avenue for appeal.

This lack of an appeal right can be frustrating to a hospital because there are times when findings of immediate jeopardy are unsupported by the facts. Even though the immediate jeopardy finding may not, itself, be appealable, it is possible that the collateral payment consequences of such a finding are appealable to the Provider Reimbursement Review Board.

Such an appeal would be costly, and it is likely that CMS would take the position that the effect of a finding of immediate jeopardy on entitlement to VBP payments is not appealable. For budgeting purposes, however, a hospital should assume that a finding of immediate jeopardy during the performance period will disqualify it from receiving VBP payments.

Further Evaluation. In the final rule outlining the VBP program, CMS noted that “several commenters requested improvements to or clarification of the Medicare State Survey and Certification Process prior to its use in the Hospital VBP program” [76 Fed. Reg. 26530]. Given that an immediate jeopardy finding may result in a hospital’s exclusion from the VBP program, it is crucial for CMS to ensure that survey organizations perform surveys and issue immediate jeopardy findings in a consistent manner.

CMS did acknowledge in the final rule that it intends to further evaluate the immediate jeopardy definition in the context of the VBP program, but for many hospitals that clarification has not timely occurred. Nonetheless, in its evaluation of immediate jeopardy, CMS should consider many facets of an immediate jeopardy finding in the context of the VBP program.

For example, CMS may consider whether varying degrees of immediate jeopardy findings are warranted, such that the degree of seriousness of an immediate jeopardy finding is considered before excluding a hospital from the VBP program. Furthermore, the timing of an immediate jeopardy finding also should be considered. For example, such a finding may be imposed months after the incident(s) that formed the basis for the finding and after corrective action has been taken by the hospital, but still the hospital is barred from the VBP program.

For the fiscal year 2014 VBP program, the patient experience of care and clinical process of care measures share the same performance period (April 1, 2012, to December 31, 2012), while the mortality measures have a different performance period (July 1, 2011, to June 30, 2012) [76 Fed. Reg. 74122, 74535 (Nov. 30, 2011)]. The performance period for mortality measures in FY 2014, therefore, overlaps with the performance period for FY 2013 (July 1, 2011 to March 31, 2012).

A hospital that has an immediate jeopardy finding in the FY 2013 performance period and is thereby excluded from the VBP program for that year will presumably also be excluded from the FY 2014 VBP program as a result of the performance period for mortality measures. CMS has acknowledged that “a single performance period that applies to all of the Hospital VBP measures for a particular payment year would be desirable” and intends to move toward that structure in the future. In the interim, however, an “immediate jeopardy” finding, depending on when it falls, may possibly exclude a hospital from multiple VBP program years.

Notwithstanding CMS’s statement that it would consider modifying how findings of immediate jeopardy affect participation in VBP, its flexibility is limited by the statutory language. In any event, CMS has not made any changes to its policy and, at least for the present, a finding of immediate jeopardy during the performance period (even if the related incident occurred outside of the performance period) will exclude a hospital from participation in VBP.

Depending on the hospital’s actual performance, this exclusion may or may not be punitive. Obviously, a hospital that would have qualified for an incentive payment will be disappointed if a finding of immediate jeopardy prevents it from receiving the hoped-for payment. On the other hand, a hospital that would suffer a penalty under VBP will benefit from being excluded from VBP.