Scoring efficiency rankles hospitals
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WASHINGTON -- For the first time, Medicare will soon track spending on millions of individual beneficiaries, reward hospitals that hold down costs and penalize those whose patients prove most expensive.
The administration plans to establish "Medicare spending per beneficiary" as a measure of hospital performance, just like the mortality rate for heart attack patients and the infection rate for surgery patients.
Hospitals could be held accountable not only for the cost of care they provide but also for the cost of services performed by doctors and other health care providers in the 90 days after a Medicare patient leaves the hospital.
This plan has drawn fire from hospitals, which say they have little control over services provided after a patient's discharge -- and, in many cases, do not even know about them. More generally, they worry about Medicare's plans to reward and penalize hospitals based on untested measures of efficiency that include spending per beneficiary.
A major goal of the new health care law, often overlooked, is to improve "the quality and efficiency of health care" by linking payments to health care providers' performance. The new Medicare initiative, known as value-based purchasing, will redistribute money among more than 3,100 hospitals.
Medicare will begin computing performance scores in July, for monetary rewards and penalties that start in October 2012.
The desire to reward hospitals for high-quality care is not new or controversial. The idea can be traced to a bipartisan bill introduced in 2005, when Democrats and Republicans still worked together on health care. But adding "efficiency" is new and controversial, as no consensus exists on how to define or measure health care providers' efficiency.
The new health care law directs the Health and Human Services secretary to develop "efficiency measures, including measures of Medicare spending per beneficiary." Administration officials will decide how to calculate spending per beneficiary and how to use it in paying hospitals.
Administration officials hope that such efforts will slow the growth of Medicare without risking the political firestorm that burned Republicans who tried to remake the program this year.
In calculating Medicare spending per beneficiary, the administration said, it wants to count costs generated during a hospital stay, three days before it and 90 days afterward. This, it said, will encourage hospitals to coordinate care "in an efficient manner over an extended time period."
If, for example, an 83-year-old woman is admitted to a hospital with a broken hip, she might have hip replacement surgery and then be released to a nursing home or a rehabilitation hospital. When she recovers, she might return to her own home but still visit doctors and physical therapists or receive care from a home health agency. If she develops a serious infection, she might go back to the hospital within 90 days.
The new measure of Medicare spending per beneficiary would include all these costs, which better provider coordination of care and communication could reduce, federal officials say.
Here, in simplified form, is an example offered by federal officials to show how the rewards might work. If Medicare spends an average of $9,125 per beneficiary at a particular hospital, and if the comparable figure for all hospitals nationwide is $12,467, the hospital would receive high marks -- nine points of a possible 10 awarded for efficiency.
This measure, combined with measures of quality, would be used to compute an overall performance score for the hospital. Based on this score, Medicare would pay a higher or lower percentage of each claim filed by the hospital. Federal officials are still working out details, including how to distribute the money.
Charles N. Kahn III, president of the Federation of American Hospitals, which represents investor-owned companies, said he supported efforts to pay hospitals according to their performance. But he said the administration was "off track" in trying to hold hospitals accountable for what Medicare spends on patients two or three months after they leave the hospital.
Since 2004, Medicare has provided financial incentives to hospitals to report on the quality of care, using widely accepted clinical measures. Much of the information is posted on a government website (http://hospitalcompare.hhs.gov), but it has not been used as a basis for paying hospitals.
For years, federal health officials have emphasized the importance of higher-quality care, mentioning efficiency as an afterthought. Now, alarmed at the trajectory of Medicare costs, they emphasize efficiency as an equally important goal.
Under the new health law, Medicare will reduce payments to hospitals if too many patients are readmitted after treatment for heart attacks, heart failure or pneumonia. In addition, Medicare will cut payments to hospitals if they do not replace paper files with electronic health records, and it will further reduce payments to hospitals with high rates of preventable errors, injuries and infections.
Hospital payments account for the largest share of Medicare spending, and Medicare is the single largest payer for hospital services.
Teaching hospitals worry that the new policy will penalize them because they treat sicker, more costly patients. Medicare officials tried to allay this concern, saying they would adjust the data to take account of patients' age and illness severity, as well as geographic differences in hospital wages.
Administration officials said they were aware of concerns that some hospitals might try to increase their performance scores by avoiding high-risk patients. The officials said they would watch closely for signs of such a problem.
First Published May 31, 2011 12:00 am