Pay-for-Performance and Teaching Hospitals

There has been concern that Medicare’s “quality” improvement programs–readmission reductions, hospital-acquired conditions elimination, value-based purchasing–have a disproportionate impact on some hospitals, especially those that serve more poor communities and patients.  Teaching hospitals are generally affiliated with medical schools and while they often have a reputation for high-quality, they also can score poorly in these programs, and that may be because of the patient populations they treat.  A report from an organization representing the colleges, the Association of American Medical Colleges, issues a report indicating the negative revenue impact these programs are having on teaching institutions.  (AAMC Report)   There are 302 major teaching hospitals; up to 5.5% of their base Medicare revenues are at risk.  And for these teaching hospitals, losing revenue is a reality–90% are penalized under the readmissions program, 50% under the acquired-conditions one and 60% under value-based purchasing.  Since many of these hospitals have more quality accreditations and perform better on clinical process and outcome measures, there is a serious disjunct somewhere.  The researchers divided teaching hospitals into quintiles according to payment adjustments under the programs and looked to see if there were correlations across various factors.  The most important correlation was with socio-economic status; hospitals serving more poor patients were more likely to be penalized.  This was far and away the most explanatory variable among those examined.  The only other one that had even modest explanatory power was teaching intensity–the number of interns per bed.  The study once again demonstrates that there are serious flaws in Medicare’s quality programs and that the hospitals which treat more poor people, and need more resources to treat them, are being hurt by the failure to make appropriate adjustments in how performance is calculated.