PRO: Should Hospitals Get Reimbursements Based on Quality Performance?


Ask a hospitalist “Is quality important?” and most will answer “Yes.” Now ask the hospital’s CEO/CFO that same question, and you’ll get a resounding “Yes.”

Quality, as the primary determinant of value, has become priority No. 1 for hospitals.1 And with the Centers for Medicare & Medicaid Services’ (CMS) proposed rules for value-based purchasing (VBP), starting with a 1% withholding of Medicare reimbursement for demonstration of quality-measure performance, big dollars are at risk for hospitals.2

As the key providers of inpatient care, hospitalists will share in this financial accountability. The next-generation HM program must show value not only through efficiency and cost reduction, but also expanded services and quality.

Quality is a means of defining good care. Historically, the medical profession has escaped external accountability for quality as part of practitioner autonomy. Today, more than ever, consumer groups, payors, and regulatory bodies are demanding demonstration of quality outcomes, which impacts reimbursement and market share.

Is this demand for quality performance negative? Misused, it can be a mechanism for cost control through seemingly arbitrary indicators. Considered more broadly, it can be positive: We will be able to evaluate our practices to improve care.

Either way, the quality ship has sailed. Accepting this change, we see that the direction and execution are largely left open-ended, which brings another positive: HM has an opportunity to charter the course.

Hospitalists are inpatient care experts; we understand and improve health systems to provide excellent care. Above all else, quality is what we stand for. As a field, we are at the leading edge of change. Getting ahead of quality at each of our institutions is a great opportunity, and helping hospitals implement and deliver on quality initiatives is job security. Being held to what we value, hospitalists should be incentivized by quality performance.

Quality and Compensation

Why tie compensation to quality outcomes? First, hospitals are financially accountable for performance, and HM is financially accountable to hospitals. Second, we incent important objectives, in addition to other mechanisms (e.g. transparent reporting), to drive performance.

The majority of HM programs have an incentive component to their compensation structure, and quality is the leading performance incentive (hospitalists in these programs also have higher incomes).3 We can expect to see HM compensation structures evolve toward pay-for-performance or gainsharing models. HM groups should turn their focus to using incentives or bonuses. Here are some tips:

  1. Lead quality initiatives. Participate in hospital-based patient safety and satisfaction projects. Communicate the importance to your group to achieve buy-in.
  2. Define mutual goals. Choose two or three measurable areas that are the top priority items for the hospital and your group, and put them on your scorecard. Consider measuring team performance.
  3. Make it count. Make the amount of financial incentive a portion of compensation that is meaningful. Share data—and the effect on compensation—regularly to drive performance.

Quality is ours to lead. Define and deliver it, and you’ll find your group to be indispensable to the hospital, with dollars to gain—for all the right reasons. TH

Dr. Wright is senior medical officer at Hospitalists Management Company in Wisconsin and a Team Hospitalist member.


  1. Wachter RM, Goldman L. The hospitalist movement 5 years later. JAMA. 2002;287:487-494.
  2. Centers for Medicare & Medicaid Services. Medicare program: hospital patient value-based purchasing program. Federal Register. 2011;76(9).
  3. State of Hospital Medicine: 2010 Report Based on 2009 Data. SHM website. Available at: www.hospitalmedicine.org/survey. Accessed April 2, 2011.

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