CMS on Wednesday announced that 764 hospitals will face Medicare payment cuts in fiscal year (FY) 2022 under Medicare's Hospital-Acquired Condition (HAC) Reduction Program.

Cheat sheet: Hospital-Acquired Condition Reduction Program

Background

The HAC Reduction Program, which launched in October 2014, evaluates hospitals based on their rates of several avoidable complications, including bed sores, blood clots, central line infections, falls, and infection from methicillin-resistant Staphylococcus aureus (MRSA) or Clostridium difficile (C. diff).

Every year, the facilities in the lowest-performing 25% are penalized by losing 1% of their Medicare payments. As of 2021, the program has penalized 1,978 hospitals at least once since the program was established. Of those hospitals, 1,360 have been penalized at least twice, and 77 have been penalized each year the program has been in place.

Congress exempts the more than 1,000 critical access hospitals, certain specialized hospitals (children's, psychiatric, and veterans), and all hospitals in Maryland from the penalties.

Criticism of the program

Over the years, the hospital industry has voiced opposition to the HAC program, arguing that its methodology relies on an arbitrary cutoff to distinguish between high and low performers. In 2018, the American Hospital Association (AHA) published an analysis showing that only 41% of the 768 hospitals penalized in 2017 had HAC rates significantly higher than the hospitals that were not penalized.

The industry has also argued that the methodology punishes hospitals that thoroughly test for infections and other patient safety hazards, as they may uncover more problems and appear statistically worse than others with lower testing standards. According to Akin Demehin, director of policy at AHA, the HAC penalties are "a game of chance" based on "badly flawed" measures.

For its part, the Medicare Payment Advisory Committee (MedPAC) in a 2019 report said while "it is important to drive quality improvement by tying infection rates to payment," the HAC program's "tournament" model—which pits hospitals against one another—artificially limits how many hospitals can succeed. MedPAC recommended providing hospitals with fixed targets, so they know the expected standard.

Details on this year's penalties

This year, 764 hospitals will have their Medicare payment rates reduced for having high infection rates and other patient complications from mid-2018 to 2019. In response to the 2019 Covid-19 public health emergency, CMS excluded all calendar year 2020 data from this year's HAC program calculations and plans to do so for future years, as well.

Hawaii and Idaho were the only states included in the program for this year where no hospitals received penalties.

(CMS HAC Reduction Program dataset, 1/26; CMS HAC Reduction program resources, accessed 1/28)