WASHINGTON -- Federal policies to reward high-quality health care are unfairly penalizing doctors and hospitals that treat large numbers of poor people, according to a new report commissioned by the Obama administration that recommends sweeping changes in payment policy.
Medicare and private insurers are increasingly paying health care providers according to their performance as measured by the quality of the care they provide. But, the draft report by an expert panel says, the measures of quality are fundamentally flawed because they do not recognize that it is often harder to achieve success when treating people who do not have much income or education.
Low-income people may be unable to afford needed medications or transportation to doctor's offices and clinics, the panel said. If they have low levels of formal education or literacy, they may have difficulty understanding or following written instructions for home care and the use of medications. In addition, the clinics and hospitals they use may lack the resources and high-tech equipment needed to diagnose and treat illnesses.
The panel found that existing payment policies unintentionally worsen disparities between rich and poor by shifting money away from doctors and hospitals that care for "disadvantaged patients."
Measures of health care quality and performance -- widely used by Medicare and private insurers in calculating financial rewards and penalties -- should be adjusted for various "sociodemographic factors," said the expert panel, created by the National Quality Forum, an influential nonprofit, nonpartisan organization that endorses health care standards.
"Factors far outside the control of a doctor or hospital -- patients' income, housing, education, even race -- can significantly affect patient health, health care and providers' performance scores," said Christine K. Cassel, the president of the quality forum.
President Barack Obama's administration commissioned the study, but is not entirely comfortable with the recommendations, officials acknowledged. The existing policies of the quality forum and the government say that performance scores should generally not be adjusted or corrected to reflect differences in the income, race or socioeconomic status of patients.
Steven H. Lipstein, the president of BJC HealthCare in St. Louis and a member of the panel, said: "The administration's current policy on adjustments for socioeconomic status are quite inadvertently exacerbating disparities in access to medical care for poor people who live in isolated neighborhoods. I'm sure that's not what President Obama intended with the Affordable Care Act."
The 26-member panel said that policymakers who devise or use performance measures should "assess the potential impact on disadvantaged patient populations and the providers serving them," to avoid hurting "safety net providers."
Many provisions of the 2010 health law seek to improve care by tying Medicare payments to the performance of doctors, hospitals, nursing homes and health plans. Medicare, for example, is reducing payments to hospitals where an above-average share of patients return within a month of being treated and discharged.
But for hospitals with large numbers of poor patients, the panel said, such financial penalties are unfair because "readmissions are difficult to avoid in patients who can't afford post-discharge medications, have no social support to help with recovery at home, have no way to get to follow-up doctor appointments, or are homeless."
Two doctors or hospitals that provide the same high-quality care may get very different outcomes if one has mostly low-income patients and the other serves a more affluent population, the panel said.
Using the raw data, without any adjustment for poverty or other demographic factors, "can lead to incorrect inferences about quality" and "provides the public, including patients, with misleading measures of performance," it said. "Providers with a disproportionate share of disadvantaged patients will appear to provide lower quality care than they actually do, and vice versa."
In existing pay-for-performance programs, the panel said, doctors and hospitals serving poor people are more likely to be identified as "poor performers" and to face financial penalties. The penalties deprive these providers of the resources they need to improve care, and "it is ultimately the patients who suffer," it said.
Helen Burstin, a senior vice president of the quality forum, said that the endorsement of performance measures "has become increasingly controversial over the issue of whether to adjust for socioeconomic status."
Andrew M. Ryan, an associate professor at Weill Cornell Medical College in New York, likened the issue to the debate raging over whether teacher pay should be linked to student achievement, measured by test scores. If not used carefully, he said, such merit pay arrangements can divert resources from the neediest schools and students.
The Obama administration has championed the idea of pay for performance, with financial penalties for hospitals where deaths, readmissions or complications occur at rates above the national averages.
The administration has argued against adjusting the data for social or demographic factors, saying this would be equivalent to accepting a double standard, with lower expectations for the care provided to low-income patients.
"We do not want to hold hospitals to different standards of care simply because they treat a large number of low socioeconomic status patients," said Kate Goodrich, the director of quality measurement programs at the federal Centers for Medicare and Medicaid Services. "Our position has always been not to risk-adjust for socioeconomic status within our measures because of concern about masking disparities, and potentially rewarding providers who provide a lower level of care for minorities or poor patients."
She said the panel's recommendations were premature.
But research by the Medicare Payment Advisory Commission, which advises Congress, tends to support the National Quality Forum.
"Lower-income patients have higher readmission rates," the commission said, and major teaching hospitals, which serve large numbers of indigent patients, face the highest penalties.
Atul Grover of the Association of American Medical Colleges, a member of the quality forum panel, said: "Teaching hospitals take care of the poorest, sickest, most vulnerable patients. They should not be penalized for factors outside their control."
The quality forum, which includes consumer groups, insurers, health care providers and employers, tries to do all its work by consensus. Since its creation in 1999, it has adopted more than 600 quality measures, and many are used by the federal government to evaluate providers.
The government posts much of the data on websites intended to help consumers choose hospitals, nursing homes and other providers.
When reporting on performance, the government often takes account of clinical factors, like the presence of diabetes or the severity of a patient's illness. But the Obama administration said it "currently does not adjust quality outcome measures for patient socioeconomic status" because it does not want to lower the bar for services to low-income patients.
A possible compromise mentioned by the panel would be to compare hospitals and doctors with a "peer group" of health care providers serving a similar share of low-income patients.