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CMS Says New Demo Results Boost Quality-Based Payment Prospects

January 26, 2007 -- Medicare officials Friday trumpeted year-two results from a pilot program testing bonus payments for higher quality hospital care as evidence that the Medicare payment system should be changed.

The results from the demo sponsored by Premier Inc., a hospital consortium, showed continuing improvements in quality of care in a program in which hospitals were paid more if they performed well on 30 measures assessing treatment for heart attacks, heart failure, bypass surgery, pneumonia, and hip and knee replacements. "The average improvement in the project's second year was 6.7 percentage points, for total gains of 11.8 percent points over the project's first two years," the Centers for Medicare and Medicaid Services (CMS) said in a press release. A Premier report submitted to CMS on the demo also found that hospital costs could be lowered as much as $1.4 billion if certain treatment practices were followed for all U.S. patients with four of the five conditions.

Herb Kuhn, acting CMS deputy administrator, tied the payment system to a reduction in deaths, hospital readmissions, and treatment complications, and hinted that CMS is considering mandating a quality-based payment system for hospitals generally in a report to Congress it plans to file this summer.

"The results look very promising and we're excited by what we're seeing," Kuhn said Friday in a telephone briefing of reporters. Kuhn said that quality improvements in the demo were "indisputable" but acknowledged that CMS hasn't independently verified a finding by Premier tying quality-of-care improvements in the demo to 1,284 fewer deaths from heart attacks.

Separately, the New England Journal of Medicine announced the early release Friday of findings comparing hospitals in the Premier demo to other hospitals that also publicly reported data on the quality of their care without being paid more if they had higher quality of care.

The conclusion: payment makes a difference. The 207 Premier facilities improved more on quality of care than the 406 facilities that were only involved in public reporting. The journal described the added improvements in quality as "modestly greater."

In an editorial accompanying the release of the findings, which will appear in the February 1 issue of the publication, the New England Journal said "the findings still leave us with many uncertainties concerning the level of financial incentives needed and the optimal formula for payment that might be used for attaining high levels of performance."

The editorial suggested that "rather than adopt a single new payment system for all of Medicare, a series of regional models could accelerate learning and allow Medicare officials to find out more about the effect of differing levels of incentives and formulas for payments."

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