Medicare’s Hospital Pay-for-Performance Programs

By August 13, 2015 Commentary

I confess, I really enjoy it when somewhat grandiose programs that are supposed to transform health care pretty much fall far short of the projected effects.  So it is with pay-for-performance.  An article in Health Affairs looks at the Medicare hospital pay-for-performance initiatives and expresses concerns about their operation and effects.   (HA Article)   Three primary programs include the Hospital-acquired Conditions Reduction program, under which hospitals must avoid patients contracting certain infections or other conditions or get a payment reduction; the Value-Based Purchasing program, which also adjusts payment in part based on quality measures; and the Hospital Readmissions Reduction initiative, which we have frequently discussed.  By 2017 hospitals could lose as much as 6% of base payments from Medicare under these three programs.  As you might expect there can be overlap in the quality measures in the three programs.  The value-based purchasing program is budget-neutral but in 2015 almost 45% of hospitals lost some reimbursement, generally small amounts.  The readmission program is not budget-neutral and is ensnaring increasing numbers of hospitals, which in total lost over $420 million in Medicare reimbursements for 2015.  Many of the penalized hospitals under this program and the hospital-acquired conditions program were major institutions with otherwise good markers of quality of care.  As the article recites, many health care experts have criticized the design of the measures used in these programs, the failure to have adequate case-mix adjustment, the inconsistency in data collection and reporting that makes consistency of results unlikely and the administrative burden and costs imposed upon the hospitals.  It is also very difficult to attribute any improvement in quality on these programs as opposed to other factors.  All these issues have been presented to CMS, which generally seems to just ignore them.

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