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At Long Last, Medicare Launches Quality-Based Payment System for Hospitals

By John Reichard

April 29, 2011 -- After a decade or so of collecting information from hospitals on the quality of their care, the Medicare program announced Friday that it will finally start using what the data actually reveals about a hospital's performance to set the level of payments it receives.

Starting Oct. 1, 2012, hospitals will get paid more if they ensure patients get care within 90 minutes of possibly having a heart attack.

So too will those that provide care within a 24-hour window to surgery patients to prevent blood clots; communicate detailed instructions to heart failure patients on follow-up care once they leave the hospital; and ensure their facilities are clean and well-maintained.

Other measures used to vary payment levels include those assessing the quality of treatment for pneumonia and steps taken to prevent patients from acquiring infections within the hospital.
The American Hospital Association issued a statement expressing "disappointment" with the inclusion of infection data to set payments, among other criticisms.

The Centers for Medicare and Medicaid Services said that in addition to the "process of care" measures, the payment system will take into account the experience of patients during a hospital stay, such as how easily they can communicate with doctors and nurses. Facilities that patients rate highly in that area put themselves in a stronger position to get paid more.

The program was unveiled as part of a final regulation.

Officials said in a telephone news briefing Friday on the new "Value-Based Purchasing Program" that they will give greater weight to "process-of-care" measures than patient satisfaction measures in computing overall performance scores. They said they will follow a 70 to 30 balance in their weighting system.

The higher payments in the fiscal year that starts Oct. 1, 2012 will come from a pool of $850 million collected through reducing, by 1 percent, the Medicare payments of all of the 3,500 hospitals affected.

The Centers for Medicare and Medicaid Services said in a news release that "the size of the fund will gradually increase over time, resulting in a shift from payments based on volume to payments based on performance."

Critics say the system is unfair to facilities that have relatively fewer resources to devote to improving the quality of their treatment. However, a CMS official noted on during the briefing that hospitals showing improvement on quality performance measures can also qualify for more reimbursement. In other words, improvement is rewarded financially, along with attainment of certain standards of performance.

CMS Administrator Donald M. Berwick said that over time the measurement system will focus more on the actual medical outcome of treatment rather than on the processes a facility uses in delivering a particular type of care. "This is work in progress," he said of the initial set of measure. "This is by no means the complete set."

Berwick said the payment system would help accomplish the goals of a new public-private program to advance patient safety, which CMS estimates will save up to $35 billion in health costs over the next three years, including $10 billion in Medicare (See related story).

|According to a CMS estimate, Medicare spent $4.4 billion in 2009 to care for patients harmed in the hospital. Readmissions to the hospital cost Medicare another $26 billion, CMS estimated.
The American Hospital Assocation said in a statement that "we are disappointed that our recommendations to improve the Value-Based Purchasing program were ignored. We have serious concerns about specific components, such as the inclusion of hospital-acquired" infections in the payment system.

Because of other provisions to penalize hospitals financially for such infections, hospitals would unfairly be penalized twice, the AHA statement said. It added that the final rule gives too much weight to patient satisfaction measures pending needed improvements in how patient experiences are assessed. "Lastly, the AHA urged CMS to exclude from hospitals' scores any measures for which they report fewer than 25 cases, rather than 10 cases and we are disappointed that CMS did not follow our recommendation."

AHA said it supports the concept of tying payment to performance on quality measures, however.

Medicare has paid hospitals more for a number of years if they report performance data on a variety of quality measures. They get paid less if they do not report the data. But actual performance has not been used to vary payment levels. Performance data has been made available to the public, however, to help them compare hospitals in deciding where to go for treatment.

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