Want to support Global Action on Aging?
Medicare Plan Would Give Bonuses for Superior Care
By Laurie McGinley, The Wall Street Journal
May 27, 2003
In a new strategy to improve
health care for its 40 million patients, Medicare is planning an experiment:
Reward hospitals that provide superior care.
Given the size of Medicare, its
entry into the "pay-for-performance" field adds momentum to the
growing movement to use financial incentives to improve heath care in the
Medicare traditionally has paid
hospitals the same fee for a procedure regardless of the outcome. But now,
it is following the lead of private employers and managed-care plans that
have begun paying hospitals and doctors more if they can show their patients
The agency that runs Medicare and
Medicaid Services has already begun posting statistics on the quality of
care at various nursing homes and home health agencies on the Medicare Web
site (www.medicare.gov) and running
ads in local newspapers. On the Web site, consumers can check the percent of
residents with bed sores, for example, or check inspection results and
pertinent staff information.
Under the latest pilot project by
Medicare, hospitals would submit data on patients with eight medical
conditions -- including stroke, heart attack, hip surgery, pneumonia and
heart failure -- that are common among Medicare's patients. A hospital
might, for instance, report how quickly patients with pneumonia get
antibiotics, which increases the likelihood of a speedy recovery. Or it
might report what percentage of heart-attack patients get beta blockers at
discharge, which help prevent future heart attacks. Those results would
likely be posted publicly.
As proposed by Medicare,
hospitals with top scores on quality would get a small bonus -- 1% or 2% --
added to their regular Medicare payments. Under the initial plan, the lowest
performers wouldn't be affected, while the top hospitals would get
additional funds for all three years of the project.
"There's no question that
pay for performance will work," said Thomas Scully, head of the federal
Centers for Medicare and Medicaid Services, the agency that oversees
Mr. Scully has championed
provider "report cards," saying that they give consumers important
information and prod providers to change their behavior. "If you fly
into Washington, D.C., you can figure out the best restaurant, the best
hotel and the best cab service, but not which hospital does the best hip
replacements," he said at a recent conference.
There is still some debate over
how to set up the program to provide patients with the most benefits. The
White House Office of Management and Budget has insisted that low performers
lose a small portion of their funds in the third year.
The budget office, Mr. Scully
said, "is worried about the precedent" of paying bonuses to
high-performing hospitals, while not reducing payments to those that don't
score high on quality measures. An OMB spokesman said the agency supports
the idea of "pay for performance" but wants to review the project
Medicare officials estimate that
the three-year pilot project could save the government $5 million or cost it
$5 million -- or somewhere in between, Mr. Scully said. He argues it would
save money because high-quality care can reduce complications and
readmissions to hospitals.
He said that the OMB is
estimating that the project may not cost the government anything, or could
cost it as much as $25 million.
But some in the hospital industry
worry that the data collected on hospitals aren't sophisticated or ample
enough yet to use as a basis for reimbursement -- or punitive damages for
alleged poor performance.
The Medicare pay-for-performance
experiment is separate from another project announced last year by big
hospital groups to encourage members to voluntarily report outcomes of 10
quality measures and post information on the Internet beginning this summer.
That effort, which is also backed by Medicare, doesn't call for bonuses.
Medicare's three-year project
depends on the cooperation of Premier Inc., an alliance owned by more than
200 independent hospitals and health-care systems that operate, or are
affiliated with, nearly 1,500 hospitals and other health-care sites.
Premier, based in San Diego,
operates an elaborate data-collection system critical to the Medicare
project. And while it has expressed enthusiasm for the plan, it has also
expressed concern over the possibility of punishment of low performers with
a loss of funds.
Though Premier has yet to sign
off on changes sought by the OMB, said Mr. Scully, he is confident the group
will participate and the project will move forward. Officials are hoping as
many as 400 hospitals will participate.
"We haven't seen any details from OMB's review," said a Premier official. "However, we believe the incentives for hospitals to participate to be favorable, not punitive."