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CMS Says Premier Demo Proves P4P Works

NOVEMBER 14, 2005 -- The Centers for Medicare and Medicaid Services (CMS) is awarding $8.85 million to hospitals that showed measurable improvements during the first year of the CMS/Premier Hospital Quality Incentive Demonstration, officials said Monday.

The pay-for-performance demonstration is the first time Medicare has awarded financial bonuses linked to the quality of care provided, CMS said in a news release. The demonstration also provides statistical evidence that the model works to improve the quality of health care, agency officials said.

"We are seeing that pay-for-performance works," CMS Administrator Mark B. McClellan said in a statement. "We are seeing increased quality of care for patients, which will mean fewer costly complications—exactly what we should be paying for in Medicare."

In the initial year of the three-year demonstration, the quality of care delivered improved in five areas: patients suffering from heart attack, heart failure, pneumonia, coronary artery bypass graft, and hip and knee replacement.

The average improvement across the clinical areas was 6.6 percent as measured by 33 nationally standardized and widely accepted quality indicators, according to Premier Inc., a nationwide alliance of not-for-profit hospital facilities and healthcare systems.

According to Premier, approximately 235 heart attack patients were saved as a result of improved quality.

Pay-for-performance or "P4P" pays a hospital or other health provider more for higher scores on specific measures of performance, such as the percentage of heart attack patients who have been prescribed lifesaving beta-blocker drug therapy when they leave the hospital. Federal officials and policy wonks are touting pay-for-performance as a way to improve medical care for Medicare beneficiaries and spend federal health care dollars efficiently.

Improvement in evidence-based quality measures is expected to save Medicare money over time because of the demonstrated relationship to improved patient health, fewer complications, and fewer hospital readmissions.

As part of the CMS/Premier demo, hospitals in the top 10 percent for a given condition were given a 2 percent bonus on their Medicare payments for that condition. Hospitals in the second 10 percent were given a 1 percent bonus.

Premier President and Chief Executive Officer Richard Norling said the findings, compiled from data gathered from more than 260 hospitals, "clearly indicate" that pay-for-performance programs improve the quality of care delivered in hospitals.

The largest award, $326,000, will go to Hackensack University Medical Center in New Jersey for care of patients with coronary artery bypass graft surgical procedures. The second largest award, $249,999, will be given to the Bone and Joint Hospital in Oklahoma City, Okla., for care of patients who received hip and knee replacement procedures.

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