The future of a Medicare-sponsored pay-for-performance model for hospitals rests on a three-year trial involving 268 hospitals and millions of dollars in bonuses.
The Centers for Medicare and Medicaid Services (CMS) has partnered with Premier, Inc., a nationwide alliance of not-for-profit hospitals, to undertake The Premier Hospital Quality Incentive Demonstration Project. Premier was selected for this demonstration project because each of its hospital members has a database system in place that allows tracking and reporting of data for 34 quality measures.
“This is the only [pay-for-performance project] for hospitals at this time,” says Mark Wynn, director of the Division of Payment Policy Demonstrations, CMS.
The project began in October 2003. At the end of each of the three years of the trial, top-performing hospitals are rewarded with cash bonuses from CMS. Performance is based on multiple evidence-based quality measures for inpatients with heart attack, heart failure, pneumonia, coronary artery bypass graft, and hip and knee replacements. The individual measures are compiled into an overall quality score for each clinical condition.
“The administration is extremely interested in pay for performance in general, and very pleased with the project,” says Wynn. “The administrator is interested in expanding pay for performance to other hospitals, but exact details on this are not available.”
The pay structure of the project rewards those Premier hospitals that rank highest for each quality measure: Hospitals that rank in the top 20% of quality for the five general clinical areas receive a bonus. Those in the top 10% for each of the quality measures will receive a 2% bonus of their Medicare payments for the measured condition; hospitals in the top 20% will receive a 1% bonus.
In the first year of the project, Medicare spent approximately $8.9 million in incentive bonuses, and bonuses per hospital ranged from $847,000 to $900,000. This money comes, in part, from savings earned by improved outcomes, including shorter hospital stays and fewer readmissions.
Overall, though, participants seem to believe that the real payoff is not in dollars, but in improved quality of care as well as public recognition of their outcomes. (CMS has agreed not to reveal the names of the 130 lowest-performing hospitals, but the top performers are enjoying positive publicity.)
“Quality is the key motivator,” says Bill M. Hazelwood, MD, FCCP, McLeod Regional Medical Center, Florence, S.C. “Money doesn’t do anything for me—I’m sure my administrators think differently. But our efforts have paid off in lives saved and in people getting home quicker.”