Medicare Shifting Strategy to Pay Hospitals for
Quality Care Over Quantity
It is part of new “quality” emphasis in new health care
bill (Affordable Care Act)
May 2, 2011 – Medicare is making a change in the
strategy for payments to hospitals that will reward quality treatment rather
than the quantity of care provided. The change was set in motion by the
new health law, the Affordable Care Act. Following is the report by
Jordan Rau of Kaiser Health News on what it means to senior citizens.
Medicare took its broadest step yet in moving away
from its traditional hospital payment method, finalizing a plan to alter
reimbursements based on the quality of care hospitals provide and
patients’ satisfaction during their stays.
The initiative is the beginning of a transition
from paying hospitals on the basis of the amount of care they provide.
Many health care researchers believe this fee-for-service system has
encouraged unnecessary care, driving up costs and giving hospitals no
incentive to economize.
Medicare’s new “value-based purchasing” program was
mandated in last year’s health care law. It has sparked less discussion
than has another experiment to change Medicare’s payment system through
accountable care organizations, where a select group of doctors and
hospitals get bonuses if they find ways to save money.
But this latest payment change affects twenty times
more hospitals than would ACOs. More than 3,000 acute care hospitals
will have their payments adjusted starting in October 2012.
final rules announced Friday, Medicare will cut payments to
hospitals 1 percent and set that money aside for a bonus pool. Hospitals
that do better than average on a variety of measurements, or show the
greatest improvement from the previous year, would earn bonus payments,
totaling $850 million in the first year. The bonus pool would increase
to 2 percent of Medicare payments in October 2016.
“In many ways, it’s a watershed moment for the
health care system,” said Ashish Jha, a professor at the Harvard School
of Public Health who has studied hospital quality. “It’s a modest amount
of money and not something that’s going to radically change the way we
pay for hospital care in America. But it’s a really important step
toward paying for better care and not just for more care.”
Seventy percent of the bonuses initially will be
based on how often hospitals follow guidelines on 12 clinical care
measures. These include giving anti-clotting medication to heart attack
patients within 30 minutes of arrival; providing antibiotics to surgery
patients just before an operation; and taking steps to avoid blood clots
in surgical patients.
The other 30 percent of the bonuses will be
determined by how patients rate hospitals on their experiences. Medicare
will use hospital-conducted surveys that ask patients about how nurses
and doctors communicated, how clean their rooms and bathrooms were and
how well their pain was controlled.
Hospital groups had unsuccessfully pushed federal
officials to reduce the influence that patient views would have on their
payments, arguing that the surveys didn’t always reflect reality and
would penalize hospitals in
some regions where patients are less forthcoming with praise.
Medicare has run voluntary programs where quality
alters how much hospitals are paid, but this is the first time hospitals
will be obliged to participate. CMS estimates 353 hospitals initially
won’t be included in the new payment program because they don’t have
enough cases to be measured accurately. For the rest, judgment begins
soon, because CMS will look at their scores starting in July when it
determines how much they’ve improved for the first year of the payment
What Others Are
Los Angeles Times: New Medicare Payment Strategy to Reward Hospitals
For High-Quality Care The Obama administration issued a final regulation to reward
hospitals that provide high-quality care, the first in a series of steps
that are designed to fundamentally transform the way that the federal
government pays for health care (Levey, 4/30).
The Hill: Medicare To Start Paying Hospitals Based On Quality, Not
Quantity Medicare will begin to reward hospitals for the quality, rather than
the quantity, of care they provide under new regulations released
Friday. The changes were called for in the health care reform law that
was enacted last year. Health experts say the U.S. spends much more on
health care than any other country without getting better outcomes in
return, in large part because Medicare reimburses doctors and physicians
for the number of tests and procedures they do, rather than their
performance (Pecquet, 4/29).
Reuters: U.S. Hospitals To Get Cash Boost For Better Care U.S. hospitals that improve medical care for elderly patients, and
reduce deadly errors, will get millions of dollars under an incentive
program launched on Friday that aims to cut overall Medicare costs
Hospitals are worried that some cash-poor hospitals
that don’t have as many resources to invest in quality improvements will
lose money under this program, potentially exacerbating the rift between
affluent and struggling institutions.
“The powerful thing about value-based purchasing is
that it’s going to continually raise the bar,” said Blair Childs, an
executive with Premier, an alliance of more than 2,500 hospitals. “The
bad thing is that if you start behind and you’re penalized financially
and there are costs associated with doing all the programs you need to
do, you run the risk of being in a death spiral.”
But Dr. Donald Berwick, the administrator of the
Centers for Medicare & Medicaid Services, said the government already
provides financial assistance to help hospitals reduce infections and
unnecessary readmissions. He said hospitals that serve lots of indigent
and uninsured patients will benefit financially when they improve their
quality, because they’ll find ways to care for patients more
“For the hospitals that are most strapped for
resources, improvements of quality are the most important,” Berwick told
reporters as he announced the final rules. “We know examples – Parkland
Hospital in Texas, Denver Health in Denver, Colo. and others— that serve
mainly Medicaid populations and nonetheless have been able to achieve
real breakthroughs in quality and should be rewarded for that
The measures CMS plans to use are already published
for each hospital on Medicare’s Hospital Compare website. CMS plans to
add more measures to its payment rules in future years, including ones
that sample how patients actually fared, and not just what procedures
doctors and nurses followed.
Below is the Complete News Release from
Health and Human Services (April 29, 2011)
Implements Affordable Care Act Provision to Improve Care, Lower Costs
Value-Based Purchasing Will Reward Hospitals
Based on Quality of Care for Patients
The Department of Health and Human Services (HHS)
today launched a new initiative which will reward hospitals for the
quality of care they provide to people with Medicare and help reduce
health care costs. Authorized by the Affordable Care Act, the Hospital
Value-Based Purchasing program marks the beginning of an historic change
in how Medicare pays health care providers and facilities—for the first
time, 3,500 hospitals across the country will be paid for inpatient
acute care services based on care quality, not just the quantity of the
services they provide.
This initiative helps support the goals of the
Partnership for Patients, a new public-private partnership that will
help improve the quality, safety and affordability of health care for
all Americans. The Partnership for Patients has the potential over the
next three years to save 60,000 lives and save up to $35 billion in U.S.
health care costs, including up to $10 billion for Medicare. Over the
next ten years, the Partnership for Patients could reduce costs to
Medicare by about $50 billion and result in billions more in Medicaid
“Changing the way we pay hospitals will improve the
quality of care for seniors and save money for all of us,” said HHS
Secretary Kathleen Sebelius. “Under this initiative, Medicare will
reward hospitals that provide high-quality care and keep their patients
healthy. It’s an important part of our work to improve the health of our
nation and drive down costs. As hospitals work to improve their
performance on these measures, all patients – not just Medicare patients
– will benefit.”
In FY 2013, an estimated $850 million will be
allocated to hospitals based on their overall performance on a set of
quality measures that have been shown to improve clinical processes of
care and patient satisfaction. This funding will be taken from what
Medicare otherwise would have spent, and the size of the fund will
gradually increase over time, resulting in a shift from payments based
on volume to payments based on performance.
“Medicare is in a unique position to reward
hospitals for improving the quality of care they provide,” said Centers
for Medicare & Medicaid (CMS) Administrator Donald Berwick, M.D. “Under
this new initiative, we will reward hospitals for delivering
high-quality care, treating their patients with respect and compassion,
and ensuring they have the opportunity to participate in decisions about
Some of these measures will assess whether
● Ensure that patients who may have had a heart
attack receive care within 90 minutes;
● Provide care within a 24-hour window to
surgery patients to prevent blood clots;
● Communicate discharge instructions to heart
failure patients; and
● Ensure hospital facilities are clean and well
The measures to determine quality in the Hospital
Value-Based Purchasing Program focus on how closely hospitals follow
best clinical practices and how well hospitals enhance patients’
experiences of care. When hospitals follow these types of proven best
practices, patients receive higher quality care and see better outcomes.
And helping patients heal without complication can
improve health and ultimately reduce health care costs. For example,
ensuring heart failure patients receive clear instructions when they are
discharged on their medications and other follow-up activities reduces
the likelihood that they will suffer a preventable complication that
would require them to be readmitted to the hospital.
The better a hospital does on its quality measures,
the greater the reward it will receive from Medicare. The measures
selected for the Hospital Value-Based Purchasing program in FY 2013 have
been endorsed by national bodies of experts, including the National
Quality Forum. Hospitals have been reporting on quality measures through
the Hospital Inpatient Quality Reporting Program since 2004, and that
information is posted on the
Hospital Compare website. For a complete list of quality measures,
In the future, CMS plans to add additional measures
that focus on improved patient outcomes and prevention of
hospital-acquired conditions. Measures that have reached very high
compliance scores would likely be replaced, continuing to raise the
The Hospital Value-Based Purchasing initiative is
just one part of a wide-ranging effort by the Obama Administration to
improve the quality of health care for all Americans, using important
new tools provided by the Affordable Care Act.
The Partnership for Patients is bringing together
hospitals, doctors, nurses, pharmacists, employers, unions, and state
and federal government committed to keeping patients from getting
injured or sicker in the health care system and improving transitions
between care settings. CMS will invest up to $1 billion to help drive
In addition, proposed rules allowing Medicare to
pay new Accountable Care Organizations (ACOs) to improve coordination of
patient care are also expected to result in better care and lower costs.
More technical information about the final rule,
including the measures CMS has included in the program, as well as CMS’
scoring methodology, is included in a Fact Sheet posted on our Web page
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