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Medicare Demonstration Project Ties Quality to Reimbursement

Kate Traynor

A three-year demonstration project that begins in October will base the level of Medicare reimbursement for participating hospitals on their adherence to 35 clinical quality-of-care measures.

The project, which is open to hospitals that subscribe to Premier Inc.'s Perspective Online clinical performance database, provides financial incentives for goals related to the care given to patients with community-acquired pneumonia, hip and knee replacement, and heart disease.

"Hospitals that perform in the top 20% of the quality measures for each clinical condition will receive increased payment from Medicare, as well as public recognition," said Ted Pickens, senior director of communications for Premier. Specifically, the program provides a 2% increase in Medicare reimbursement to hospitals in the top 10% and a 1% increase to facilities in the next 10%.

The Centers for Medicare & Medicaid Services (CMS) has agreed to pay bonuses totaling $7 million during each of the three years of the program.

According to CMS, hospitals that rank in the top 50% in quality will be granted public recognition but no financial reward. Pickens said that, to his knowledge, the names of hospitals that score in the bottom half will not be made public.

During the final year of the program, hospitals that rank below a fixed point in relation to the quality-of-care measures could receive what Pickens called "a small adjustment in the Medicare payment"—in other words, a penalty.

Pickens said that the baseline for assessing the penalty "will be defined by the performance of the lowest 25% of hospitals within a clinical condition in the first year of the project."

Pickens said that, although hospitals have expressed "a lot of concern" about the penalty, "the hope is that everybody is going to improve, so that everybody as a class moves up." If this occurs, he added, most participants will see no change in the reimbursement level, but top-ranking institutions will receive the bonuses.

A CMS spokesman said the agency's "hope is that no hospital will drop below" the fixed point at which the penalty is assessed.

Of the 35 quality measures, 19 are related to drug therapy. Specific measures include

  • Administering aspirin and a beta-blocker on arrival at the hospital for patients being treated for an acute myocardial infarction and prescribing the drugs at discharge
  • Selecting a prophylactic antimicrobial drug for patients undergoing coronary artery bypass grafting or hip and knee replacement, administering the drug within an hour before surgery, and discontinuing it within 24 hours after surgery has ended
  • Screening of patients with community-acquired pneumonia for influenza and pneumoccoccal vaccination
  • Administering an angiotensin-converting-enzyme inhibitor to patients with heart failure caused by left ventricular systolic dysfunction.

Pickens said Premier estimates that about 300 of the approximately 550 hospitals that subscribe to Perspective Online will participate in the incentive program.

"Because this is a demonstration project, it was limited to people who already were Perspective subscribers," Pickens said. Despite this, "the response for people wanting to understand and learn about this has been overwhelming," he added.

"We've had calls from hospitals in virtually every state and the state hospital associations and teaching hospitals and university hospitals," he said. "I think everybody wants to have some consistent quality measures."

According to CMS, the quality assessment will use a case-mix adjustment method to ensure that fair comparisons are made among participants in the project. The agency will post performance results on the CMS Web site.