CMS Turns Medicare Cuts into Bonus Payments Based on Patient Experience

The Affordable Care Act includes a number of policies to help physicians, hospitals, and other caregivers improve the safety and quality of patient care and make health care more affordable.   Starting in October 2012, Medicare will reward hospitals that provide high quality care for their patients through the new Hospital Value-Based Purchasing Program. 

This program marks the beginning of an historic change in how Medicare pays health care providers and facilities—for the first time, hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide.

Additionally, the initiative helps support the goals of the Partnership for Patients, a new public-private partnership that will help improve the quality, safety and affordability of health care for all Americans. The Partnership for Patients has the potential to save up to $35 billion in U.S. health care costs, including up to $10 billion for Medicare.  Over the next ten years, the Partnership for Patients could reduce costs to Medicare by about $50 billion and result in billions more in Medicaid savings. 

Last spring, Medicare finalized its plan to alter reimbursements based on the quality of care hospitals provide and patients’ satisfaction during their stays.

The initiative is the beginning of a transition from paying hospitals on the basis of the amount of care they provide. Many health care researchers believe this fee-for-service system has encouraged unnecessary care, driving up costs and giving hospitals no incentive to economize.

According to an article from Kaiser Health News, “this payment change affects twenty times more hospitals than would accountable care organizations (ACOs).  More than 3,000 acute care hospitals will have their payments adjusted starting in October 2012.”

Background

Under the final rules announced last April, Medicare will cut payments to hospitals 1 percent and set that money aside for a bonus pool.  In FY 2013, the Hospital Value-Based Purchasing Program will distribute an estimated $850 million to hospitals based on their overall performance on a set of quality measures that have been linked to improved clinical processes of care and patient satisfaction.  The bonus pool would increase to 2 percent of Medicare payments in October 2016.

This will be taken from what Medicare otherwise would have spent for hospital stays, and the size of the fund will gradually increase over time, resulting in a shift from payments based on volume to payments based on performance.  This redirection will encourage care quality improvement, and which is intended to result in significant, additional savings to Medicare, taxpayers, and enrollees over time.

The Hospital Value-Based Purchasing Program measures in FY 2013 focus on how closely hospitals follow best clinical practices and how well hospitals enhance patients’ experiences of care. When hospitals follow these types of proven best practices, patients receive higher quality care and see better outcomes.  And helping patients heal without complication can improve health and ultimately reduce health care costs.

Ashish Jha, a professor at the Harvard School of Public Health who has studied hospital quality noted that, “It’s a modest amount of money and not something that’s going to radically change the way we pay for hospital care in America. But it’s a really important step toward paying for better care and not just for more care.”

Seventy percent of the bonuses initially will be based on how often hospitals follow guidelines on 12 clinical care measures. These include:

–       Giving anti-clotting medication to heart attack patients within 30 minutes of arrival;

–       Providing antibiotics to surgery patients just before an operation; and

–       Taking steps to avoid blood clots in surgical patients.

The other 30 percent of the bonuses will be determined by how patients rate hospitals on their experiences.  Medicare will use hospital-conducted surveys that ask patients about:

–       how nurses and doctors communicated

–       how clean their rooms and bathrooms were and

–       how well their pain was controlled.

The ratings are based on Medicare-approved surveys, which hospitals hire companies to give to a random selection of patients after they are discharged. Some survey are given by phone, others by mail.  All ask the same questions: Did the doctors and nurses communicate well? Was pain well controlled? Was the room clean and the hospital quiet at night? The surveys go to both Medicare and younger patients.

In setting payment, CMS plans to be a tough grader. It is going to give hospitals credit only for patients who say their experiences were always good. The surveys also ask patients to rank their stay on a 10-point scale, and Medicare will only credit hospitals that receive a 9 or 10.

CMS estimated that 353 hospitals initially won’t be included in the new payment program because they don’t have enough cases to be measured accurately.  For the rest, CMS began looking at their scores in July, when it determined how much they’ve improved for the first year of the payment program.

When the final rules were announced, hospitals announced their concerns, especially those cash-poor hospitals that do not have as many resources to invest in quality improvements will lose money under this program, potentially exacerbating the rift between affluent and struggling institutions.

Discussion

Dr. Donald Berwick, the administrator of the Centers for Medicare & Medicaid Services (CMS), said the government already provides financial assistance to help hospitals improve qualities in areas such as reducing infections and unnecessary readmissions. He said hospitals that serve lots of indigent and uninsured patients will benefit financially when they improve their quality, because they’ll find ways to care for patients more efficiently.

“For the hospitals that are most strapped for resources, improvements of quality are the most important,” Berwick told reporters as he announced the final rules. “We know examples – Parkland Hospital in Texas, Denver Health in Denver, Colo. and others— that serve mainly Medicaid populations and nonetheless have been able to achieve real breakthroughs in quality and should be rewarded for that performance.”

The measures CMS plans to use are already published for each hospital on Medicare’s Hospital Compare website. CMS plans to add more measures to its payment rules in future years, including ones that sample how patients actually fared, and not just what procedures doctors and nurses followed.

Even simple strategies such as treating patients with respect and fully explaining what they don’t understand can help boost patient satisfaction scores, said Tom Saladino, a member of Connecticut’s Institute for Healthcare Communication, at a Radiology Business Management Association conference last month, according to Diagnostic Imaging.

Saladino recommended hospitals train staff to consider patients like customers, greeting them with smiles and making eye contact. And perhaps even more importantly, he suggested that care providers not shy away from taking responsibility for when situations erupt and offering a solution.

Even with strategies to boost patient satisfaction, some areas of the country show poor patient satisfaction rates. Recent Medicare data indicate that the least satisfied patients were at hospitals in New York City, Chicago, and parts of Florida, reports the NPR Shots blog. Theories on why range from older hospital buildings that are cramped and bound to make patients unhappy to teaching hospitals fussing over patients to simply the personality of those regions.