How hospital acquired conditions can impact revenue

Learn how the Hospital-Acquired Conditions Reduction Program works and how it can impact your facility's revenue.

Launched in 2014, the Hospital-Acquired Condition (HAC) Reduction Program is a value-based purchasing program for Medicare, which is set forth in Section 1886(p)(6)(B) of the Social Security Act. Administered by the Centers for Medicare and Medicaid Services (CMS), the overall objective is to “link Medicare payments to healthcare quality in the inpatient hospital setting.”

How does the HAC program work? First, CMS evaluates overall hospital performance by utilizing a formula to ascertain the Total HAC Scores. This is done by utilizing the equally weighted average of scores on measures included in the program. For those worst-performing hospitals that fall into the bottom quartile (e.g. those with a Total HAC Score greater than the 75th percentile of all Total HAC Scores), a payment reduction of 1 percent is assessed. And, the "payment adjustment applies to all Medicare discharges for the applicable fiscal program year when CMS pays hospital claims.” Hospitals receive annual, confidential Hospital-Specific Reports (HSRs), which contain specific data on six (6) quality measures. The six quality measures follow:

- One claims-based composite measure of patient safety:

  • Patient Safety and Adverse Events Composite (CMS PSI 90)

- Five chart-abstracted measures of healthcare–associated infections (HAI), submitted to the Centers for Disease Control and Prevention's National Healthcare Safety Network:

  • Central Line-Associated Bloodstream Infection (CLABSI)
  • Catheter-Associated Urinary Tract Infection (CAUTI)
  • Surgical Site Infection (SSI) for abdominal hysterectomy and colon procedures
  • Methicillin-resistant Staphylococcus aureus (MRSA) bacteremia
  • Clostridium difficile Infection (CDI)

Hospitals have 30 days to review, appeal, and request scoring corrections. Recently, CMS announced that 764 hospitals are subject to payment cuts in fiscal year 2022 under the HAC program. Recent statistics indicate that as of 2021, 1,978 hospitals have been penalized at least once and of this group, 1,360 have been penalized at least twice, with 77 hospitals being penalized every year since 2014. Notably, critical access hospitals, select specialized hospitals, and all hospitals in Maryland are exempt from penalties per the initial legislation.

FY 2022’s report excluded all FY 2020 data from the HAC calculations and CMS will continue to do so in future years because of the pandemic’s anomalies. Hawaii and Idaho fared particularly well as no hospital in either state was penalized. The Advisory Group compiled an interactive map, which shows the states, providers, and total impact.

What can providers do to mitigate the risk of a payment reduction impact? First, from a financial standpoint, hospital executive teams should include this potential penalty as a contingency and ensure that there are adequate lines of credit, etc. if a reduction is made. One percent will impact some hospitals more than others. Second, the six (6) metrics that the program assesses should have an individual action plan associated with them across multiple departments to prevent and track these items. Lastly, ensuring that adequate documentation upon admission, whether for an emergency room visit, same day surgery, or an inpatient stay, is detailed in a medical record can help a hospital refute whether or not the infection was hospital acquired or if the patient presented with it upon arrival. For hospitals that treat a high number of long-term care facility, assisted living facility, and/or skilled nursing facility patients, documentation is particularly critical. Overall, viewing the HAC program as a positive initiative to help improve patient outcomes may also lead to a positive impact on a hospital’s revenue cycle.