Determining if your healthcare organizations should continue executing against an existing plan, or if it's time to pivot, can be a difficult decision. It is also something healthcare leaders regularly grapple with. Constant change doesn't give new initiatives the opportunity to prove their worth. Sticking with an inefficient plan for too long can result in declining quality outcomes, revenue and/or a loss of marketshare.
There are many metrics and data points that leaders can look at to assess their organization's success and opportunities for improvement. The rewards and penalties from participation in Centers for Medicaid and Medicare (CMS) programs (HVBP, HRR and HAC) are examples.
These programs benefit patients by rewarding high quality care and benefit healthcare organizations with added funding when they provide this kind of care. Failure to do so results in poor results for patients and associated penalties for organizations that can take away funding from strategic initiatives that need investment.
Three Medicare programs with a high level of participation
- Hospital Value Based Purchasing (HVBP) Program: Rewards or penalizes organizations based on quality of care.
- Hospital Readmission Reduction (HRR) Program: Penalizes organizations with higher 30-day readmission rates compared to others.
- Hospital Acquired Condition Reduction (HAC) Program: Organizations receive a one percent penalty or no penalty based on their hospital acquired infection score.
The Impact of CMS Program Participation on Your Bottom Line
To determine the impact of CMS Program participation on your organization, look beyond the amount you're being penalized (or rewarded). Organizations can receive the same fine, but depending on Medicare revenue and total revenue, that penalty could feel insignificant or it could be financially crippling.
Instead, look at your reward or penalty in relation to your overall Medicare revenue by using the following equation. Add together penalties/rewards from HVBP, HRR and HAC programs and divide by your net Medicare revenue. That total can be viewed as a score representing the total percentage of your Medicare revenue you're being penalized on.
For instance, if your score is -2.5 percent you were penalized on 2.5 percent of your Medicare revenue. If Medicare is 40 percent of your payer mix and your profit margin is four percent, you lost 25 percent of your margin, or one percentage point, to CMS penalties.
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in calculating your pain score
Penalty Score Guidelines
Your score can help determine if there are opportunities to improve or change. Based on your score, here are the guidelines for what your next step should be:
Below -2 percent: Act now to address the challenges you face that are causing you to pay CMS penalties.
Between -2 percent and -1 percent: Have a crucial conversation with leaders to discuss the implications of penalties in the future, especially as you continue to take on risk. Think about where else you could be investing instead of paying penalty fees and be proactive in developing a strategy to address the areas you're being penalized in.
Above -1 percent: Look at your strategy and assess whether you are prepared to take on more risk. Consider how potential penalties increases will impact your bottom line and if your demographics are going to change in the future.
Based on your score and these guidelines, you can determine how you're being impacted by CMS penalties and begin to establish a path forward.
To determine the impact of CMS Program participation on your organization, look beyond the amount you're being penalized (or rewarded). Organizations can receive the same fine, but depending on Medicare revenue and total revenue, that penalty could feel insignificant or it could be financially crippling.
Instead, look at your reward or penalty in relation to your overall Medicare revenue by using the following equation. Add together penalties/rewards from HVBP, HRR and HAC programs and divide by your net Medicare revenue. That total can be viewed as a score representing the total percentage of your Medicare revenue you're being penalized on.
For instance, if your score is -2.5 percent you were penalized on 2.5 percent of your Medicare revenue. If Medicare is 40 percent of your payer mix and your profit margin is four percent, you lost 25 percent of your margin, or one percentage point, to CMS penalties.
Based on your score and these guidelines, you can determine how you're being impacted by CMS penalties and begin to establish a path forward.
Contact us for assistance in calculating your pain score
Penalty Score Guidelines
Your score can help determine if there are opportunities to improve or change. Based on your score, here are the guidelines for what your next step should be:
- Below -2 percent: Act now to address the challenges you face that are causing you to pay CMS penalties.
- Between -2 percent and -1 percent: Have a crucial conversation with leaders to discuss the implications of penalties in the future, especially as you continue to take on risk. Think about where else you could be investing instead of paying penalty fees and be proactive in developing a strategy to address the areas you're being penalized in.
- Above -1 percent: Look at your strategy and assess whether you are prepared to take on more risk. Consider how potential penalties increases will impact your bottom line and if your demographics are going to change in the future.
Creating New, Improved Processes That Stick
If CMS penalties are negatively impacting your performance today or you are trying to proactively prepare for healthcare of the future, it's important that you don't institute change by jumping straight into process improvement tactics. Instead, take the following approach:
- Perform a root cause analysis. Don't look only at what you're being penalized for (like high readmissions rates) but take a holistic look at the entire process and understand all the components that are contributing to the penalty.
- Align goals. Once you've identified the underlying issue, create organization-wide goals that target the change you need. Then, cascade goals down to leaders within the organization. This creates accountability across the organization.
- Provide training. Equip your leaders with the skills and resources they need for success so that they can achieve the goals you have set forth and develop solutions that align to these goals. By giving them the tools to succeed, you can increase their engagement in driving change.
- Develop new solutions. Identify innovative solutions that align to your overall goals. To do so, look at the challenges you want to address and consider novel ways to completely recreate the process that goes beyond just making it more efficient or increasing safety precautions.
- Sustain change. Once a new solution has been developed and the results are realized, it can be easy to slip back into old patterns. To make the new solutions stick, continually reinforce change and leverage data to track progress.
By taking steps to thoroughly understand the challenges you're facing and nurture engaged staff who are equipped to create transformational change, you can feel confident that you're moving your organization forward. This will decrease penalty payments, meaning that you're providing higher quality care at a lower cost to your consumers.
As healthcare leaders seek to build strong organizations in the future, creating a strong core business operation is imperative. This starts by eliminating unnecessary spending on things like CMS penalties by taking a thoughtful approach to change. Ultimately, this enables you to reallocate the funding that was once spent on penalties to investments that will benefit your organization for the future.
Key Takeaways
Successful healthcare leaders must know where there are opportunities for improvement within their organization and address these challenges with sustainable initiatives that will drive change. To do this:
- Think differently. Leverage internal data to inform decision making and identify areas that are challenges.
- Plan differently. Identify the underlying cause for challenges that are occurring at your organization.
- Act differently. Align your employees around goals that are designed to address existing challenges.