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CMS proposes linking hospital performance to Medicare reimbursements

By admin | December 3, 2007

CMS proposes linking hospital performance to Medicare reimbursements

11.27.07

Congressional Quarterly (subscription required) reports, “The Centers for Medicare and Medicaid Services (CMS) on Monday sent a series of options to Capitol Hill to change Medicare hospital payment so that it is based on the quality of care a facility delivers.” Building on the existing Medicare “Value-Based Purchasing Program” that “pays hospitals more Medicare money if they report data on various performance measures designed to assess quality,” a “percentage of the hospital’s base operating payment for each discharge — its ‘diagnosis related group’ or DRG payment — would depend on its quality performance.”

According to Modern Healthcare, “One way to phase in the program would be to reward incentives based entirely on reporting the first year; then, in the second year, base rewards on 50 percent reporting, 50 percent performance; and in the third year, move entirely to a system of performance incentives, Kerry Weems, the CMS’ acting administrator, told reporters during a teleconference.” However, that kind of program “would require congressional approval. The hope is the Senate will include these new measures in Medicare legislation next week, Weems said.”

The Wall Street Journal (subscription required) noted, “As laid out in the report, Medicare would cut payments to all facilities by a flat 2 percent to 5 percent. That money would then form an incentive pool for distribution to hospitals that show the most improvement or that meet or surpass certain thresholds on a variety of quality measures.” Still, various “health-policy experts warn that incentive programs can backfire if structured poorly. Medicare makes up nearly half of some hospitals’ revenues, and many operate on razor-thin margins. Half of all hospitals netted less than 3.75 percent in 2005, according to a study by Cleverley + Associates, a consulting firm in Worthington, Ohio. CMS officials “said they would monitor the program closely and adjust it as necessary, and at the same time expand the quality criteria used to determine whether hospitals earn back the lost revenue.”

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