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While the health law's insurance markets are still struggling to get off the ground, the Obama administration is moving ahead with its second year of meting out bonuses and penalties to hospitals based on the quality of their care. This year, there are more losers than winners.
Medicare has raised payment rates to 1,231 hospitals based on two-dozen quality measurements, including surveys of patient satisfaction and — for the first time — death rates. Another 1,451 hospitals are being paid less for each Medicare patient they treat for the year that began Oct. 1.
For half the hospitals, the financial changes are negligible: they are gaining or losing less a fraction of a percent of what Medicare otherwise would have paid. Others are experiencing greater swings.
Gallup Indian Medical Center in New Mexico, a federal government hospital on the border of the Navajo Reservation, will be paid 1.14 percent less for each patient. Arkansas Heart Hospital in Little Rock, a physician-owned hospital that only handles cardiovascular cases, will get the largest bonus, 0.88 percent.
The bonuses and penalties are one piece of the health care law's efforts to create financial incentives for doctors and hospitals to provide better care. "This program is driving what we want in health care," said Dr. Patrick Conway, Medicare's chief medical officer.
Hospitals in Maine, Massachusetts, Nebraska, New Hampshire, North Carolina, Utah and Wisconsin are faring the best, with 60 percent or more of hospitals getting higher payments, according to a Kaiser Health News analysis. Medicare is reducing reimbursement rates for at least two-thirds of hospitals in 17 states, including California, Connecticut, Nevada, New Mexico, New York, North Dakota, Washington and Wyoming, as well as the District of Columbia. (A full list of the hospitals can be viewed here.)
Under the program, called Hospital Value-Based Purchasing, Medicare reduced payment rates to all hospitals by 1.25 percent. It set the money aside in a $1.1 billion pot for incentives. While every hospital is getting something back, more than half are not recouping the 1.25 payment they initially forfeited, making them net losers. The payment adjustments are applied to each Medicare patient stay over the federal fiscal year that started Oct. 1 and runs through September 2014.
The incentive program has received a mixed reception among hospital executives. Some complain that patients' views sometimes are swayed by the swankiness of the hospital, and that hospitals that treat the very sickest patients often get the worst evaluations. Physician-owned hospitals that focus on just a few specialties have tended to do particularly well in the program, as evidenced by the Arkansas Heart Hospital's record bonus this year.
Some leaders also object that even if they show improvements, the hospital can lose money if the improvements are not as much as others. Conway said most of the hospitals have improved their quality since the start of the program.
Most winners from last year stayed winners and losers stayed losers, but some turned around their scores. Vanderbilt University Medical Center in Nashville, Massachusetts General Hospital in Boston, New York-Presbyterian Hospital, Cedars-Sinai Medical Center and Ronald Reagan UCLA Medical Center, both in Los Angeles, and Yale-New Haven Hospital were among the 300 places that went from a penalty to a bonus. Some safety net hospitals, however, are struggling: Denver Health Medical Center, frequently held out as a model, is getting paid less.
Next year, the quality program gets tougher with more money at stake. Medicare is planning to add new measures next year, including comparisons of how much patients cost Medicare at different hospitals and rates of medical mishaps and infections from catheters
For hospitals, the changes in quality payments come on top of Medicare's penalties on 2,205 hospitals with higher than expected readmission rates. Medicare gives bonuses to the private Medicare Advantage insurance plans that score well on quality metrics.
In 2015, the health law calls for the government to begin a quality payment program for physician groups of 100 professionals or more, and that is to be expanded to all doctors by 2017. The goal of all these programs is to replace the current financial incentive in Medicare, in which the only way for a hospital to get paid more is to perform more procedures and take on more patients.