Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


CMS Ready to Launch Payment System Based on Quality, Efficiency

By John Reichard, CQ HealthBeat Editor

July 27, 2012 -- One of the most surprising—if not shocking—aspects of health care in the United States is that it can take years or even decades for doctors to adopt the best ways of treating particular diseases.

But that might soon change. In a few weeks, federal officials will launch a health care law program that will pay hospitals more for inpatient treatment of Medicare patients if they provide the best types of care and less if they don’t.

More than a decade in the making, the new “Value-Based Purchasing” program is unusual in other ways. It aims to prod hospitals to make a greater effort to treat patients with dignity and respect. It’s a part of the health care overhaul (PL 111-148, PL 111-152) that has bipartisan support. And even though they have a tradition of resisting “cookbook medicine,” providers aren’t agitating to get rid of the program.

Ideally, the program would save lives and money and make hospital stays less stressful. But it’s unclear whether it will deliver results in struggling hospitals too poor to invest in the tools needed to perform well under the new system. And analysts aren’t yet willing to predict it will save Medicare money.

Consensus on Quality
One striking feature of quality measurement in health care is a consensus-building process that accounts for the views of doctors, hospitals, consumers, government, business and labor. It’s a bottom-up design that has yielded dozens of measures that caregivers accept. Hospitals in particular are key players. Faced a decade ago with an increase in demand for reports on quality, three hospital groups—the American Hospital Association, the Federation of American Hospitals and the Association of American Medical Colleges—in 2003 agreed on a standard set of measures they would follow.

Tom Scully and Mark McClellan, former Centers for Medicare and Medicaid Services (CMS) chiefs, expanded that effort in the George W. Bush administration. Hospitals had to report performance data on the quality measures to avoid payment cuts. The CMS Hospital Compare Web site allowed consumers to compare hospitals on dozens of measures, giving the facilities an incentive to improve their scores. Hospitals knew early on that the data ultimately would be used to set payment rates.

In 2010, that became a requirement under the health care law, which requires hospital Medicare payments to be based on quality beginning Oct. 1.

On Aug. 1, about 3,000 hospitals will get an “estimated payment adjuster” based on quality scores for a nine-month period that ended March 31.

Clinical data accounts for 70 percent of the score: Do heart attack patients get a clot dissolver within 30 minutes of admission or an artery-opening angioplasty in 90 minutes? Do heart failure patients get detailed instructions on how to take care of themselves when they are discharged? Do hospitals start patients on antibiotics before surgery to prevent infection?

The other 30 percent of the grade is based on how patients perceived their care. Did the nurse respond quickly when the patient pushed the call button? Did it take too long to get pain medicine? Was the room too noisy to allow proper rest? Were nurses and doctors respectful and courteous and did they answer questions?

Once hospitals get their tentative payment adjustments, they will have two months to review them and request changes. After that, the scores determine the payments. Future measures will reward hospitals that have lower death rates. An efficiency measure is in the works that will determine whether Medicare spends more or less than average for an episode of care at a given hospital. Efficient hospitals will get higher payments and inefficient facilities, lower ones.

Can the system make a difference if doctors are wary of change? Nancy Foster, an American Hospital Association quality expert, says there are good reasons for physician hesitancy, including the difficulty of keeping up with an overwhelming outpouring of scientific literature. It also takes time for consensus to form on what treatments are best.

On the other hand, it was clear for years that quickly giving beta blocker drugs to patients admitted for heart attacks would save lives, but many hospitals didn’t do it.

Even before CMS applies the lash of cash incentives, there’s evidence that measures matter. For example, beta blocker use is now routine thanks to public reporting of performance data.

Hospitals do have concerns. CMS will cut their payments by 1 percent in fiscal 2013 to fund bonus payments for good performers. By fiscal 2017 that rises to 2 percent. Those that perform well, either by achieving certain standards or showing improvement, earn back the money lost and more. But poor performers lose out.

“Money only goes to the winners if there are losers,” noted Blair Childs of Premier, a hospital group that pioneered quality-based payments.

“Hospitals that are financially troubled may have a hard time responding to certain of the incentives.” Foster said. Also, hospitals with sicker patients are at a disadvantage in the scoring, she added. “If you’re feeling sick still when you leave the hospital even though you are on the path to wellness, you may not give that hospital as high a rating,” she said.

But hospitals still have bought in, and Childs said the effort already is saving money.

“Part of the reason that health care spending has been going down in the last three years is because of this movement,” he said.

Publication Details