The Hospital-Acquired Condition Reduction Program, or HAC program, by the Centers for Medicare & Medicaid Service (CMS), is broken. In yesterday’s American Journal of Medical Quality, the AHA and our research partners at KNG Health Consulting, Network for Excellence in Health Innovation and the Association of American Medical Colleges published an article outlining the inherent bias in the formula used to calculate the HAC penalties for hospitals and health systems.

The way the law and CMS’s regulations set up the HAC program unfairly penalizes hospitals at both ends of the spectrum – both the larger and smaller ones – and over the past two years in which HAC penalties have been finalized and the estimated amount for 2017, they are expected to total more than $1 billion. As stated in the article, “Large hospitals, compared with smaller hospitals, are more likely to be identified as poor performers for measures with very low probabilities of complication. The reverse holds for measures with higher probabilities of complication.” In other words, penalties on the HAC program are more a function of math than of true underlying quality.

As shown by our study, the HAC program penalties disproportionately impact the nation’s teaching and large urban hospitals. But that is just one of the issues with the HAC program.

Our research, as well as the research of others, identified surveillance bias and inadequate risk adjustment as two issues that could bias the measures used in the HAC program, especially the claims-based Patient Safety Indicator (PSI) measure. 

Even CMS’s own analyses show some of the measures do not truly capture hospital performance, especially for hospitals that care for patients with complex health needs. According to a 2012 analysis commissioned by CMS, many of the individual components of the composite PSI 90 measure fail to reliably capture hospital performance. Because of inadequate risk adjustment in the PSI 90 measure, hospitals may score worse simply because of their complex patient mix. That fails to accurately portray hospital performance.

America’s hospitals are deeply committed to keeping patients safe. We support programs that effectively promote patient safety improvements. Unfortunately, the HAC program misses the mark. The current law needs to be reformed to more effectively promote improvement. And better measures are needed that accurately reflect performance on important issues.

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