Medicare Starts to Reward Quality, Not Quantity, of Care

It’s no longer enough for hospitals to just send a bill to Medicare and get paid.

The nation’s biggest insurer is starting to dole out bonuses and penalties to nearly 3,000 hospitals as it ties almost $1 billion in payments to the quality of care provided to patients.

In what amounts to a nationwide competition, Medicare compared hospitals on how faithfully they followed basic standards of care and how patients rated their experiences. Medicare disclosed on Thursday how individual hospitals will fare when the program, created by the federal health law, begins in January.

In many parts of the country, the hospitals that did the best are not the ones with the most outsize reputations, but regional and community hospitals instead. New York-Presbyterian in Manhattan and Massachusetts General Hospital in Boston, both dominant hospitals in their cities, will have their payments reduced.

Other leading names in the hospital industry, including the Cleveland Clinic and Intermountain Medical Center in Utah, will receive bonuses, although not the largest in their regions.

The biggest bonus is going to Treasure Valley Hospital, a physician-owned, 10-bed hospital in Boise, Idaho, that is getting a 0.83 percent increase in payment for each Medicare patient, the records show. Auburn Community Hospital, a nonprofit near Syracuse in upstate New York, is facing the biggest cut, losing 0.9 percent of every payment for Medicare patients.

“We know we started off at the bottom, but we are going to work our way to much more acceptable scores,” said Thomas Filiak, Auburn’s chief operating officer. The hospital has already replaced the squeaky wheels on its food carts, which led many patients to note loud noise during their stays and focused teams of doctors and nurses on improving other areas on which the hospital is evaluated.

In all, Medicare is rewarding 1,557 hospitals with more money and reducing payments to 1,427 others, according to a Kaiser Health News analysis of the records. Most hospitals are seeing far smaller changes than Treasure Valley or Auburn. For many, the bonus or penalty is little more than a rounding error on their bottom lines.

It’s not clear that the new payment program will significantly improve hospitals. Some studies of similar incentive programs have found that the improvements ended up not being any better than those of hospitals that weren’t prodded financially. Nonetheless, the program is here to stay and is going to expand over the next few years, putting more money into play and adding new quality measures, including patient death rates.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.