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Hospital Pay-for-Performance Programs

By July 6, 2010Commentary

Pay-for-performance is one of the initiatives being counted on to improve quality and lower costs for the US health system.  Medicare is conducting several pilots of hospital pay-for-performance and is scheduled to more widely implement a value-based payment system in a couple of years.  A new study raises concerns about the fairness of the program to hospitals located in poorer areas of the country.   (PLoS Article) The authors looked at 2705 hospitals to project what might happen to their reimbursement under the proposed CMS payment scheme.

The hospitals were all fully compliant with Medicare’s precursor quality reporting program, so the researchers were able to link those results with other characteristics of the hospitals and the areas in which they were located.   The local economic conditions were ascertained by looking at persistent poverty levels, the unemployment rate, the education level of the workforce,  and whether the area was designated as a health professional shortage area.  Characteristics of the hospitals such as for-profit or not, rural/urban and how much revenue came from Medicaid were also examined.

The researchers found that the hospitals in poorer areas tended to be less likely to be fully participating in the current quality reporting program and to have lower scores, although their performance improved over time.  The results suggest that these hospitals would likely lose reimbursement under the value-based performance program, which would further limit their ability to invest to improve quality.  The authors suggested revising the program to judge similar types of hospitals against each other or to measure absolute rates of improvement, not performance against the same standard for all hospitals.  The study serves as a further warning about unintended, unknown and misunderstood consequences of pay-for-performance programs.

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