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CMS: Hospital pay for performance is working

Quality Improvement Monitor, May 5, 2005

Data from more than 270 hospitals participating in a CMS pay-for-performance demonstration project show that quality of care has improved significantly, the Medicare agency said in a May 3 press release.

"These early returns demonstrate that using financial incentives to reward better quality patient care works to deliver better care and avoid costly complications for our patients," CMS Administrator Mark McClellan said. "We are seeing improvements across the board, regardless of a hospital's initial performance on the quality measures."

Hospitals in the Charlotte, NC-based Premier Inc. consortium are participating in the demonstration project, which tracks performance on a set of 34 measures of processes and outcomes of care for five common clinical conditions.

Preliminary results show median quality scores for hospitals improved

• from 90% to 93% for patients with acute myocardial infarction (heart attack)
• from 86% to 90% for patients with coronary artery bypass graft
• from 64% to 76% for patients with heart failure
• from 85% to 91% for patients with hip and knee replacement
• from 70% to 80% for patients with pneumonia

Under the three-year demonstration project, which began in October 2003, hospitals in the top 10% for a given condition will receive a 2% payment bonus for that condition. Hospitals in the second 10% will receive a 1% bonus, and hospitals in the remainder of the top 50% will receive honorable mention, but no bonus, according to CMS.

CMS expects to make first-year bonus payments by September 2005.

At the end of the first year, Medicare will set baselines for the bottome 20% and bottom 10%. The levels will remain the same for the remainder of the project, and hospitals that fall below the 10% baseline in the third year will get a 2% payment reduction, and hospitals between 20% and 10% baseline will get a 1% reduction.

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