Healthcare News & Insights

Hospitals have mixed success with Medicare quality incentives

153790263If your hospital is having trouble meeting Medicare’s new quality standards, you aren’t alone. Many of your peers are, too – and they’re facing some steep financial penalties from the feds.

A new analysis from Kaiser Health News shows exactly how much the financial penalties for not measuring up are affecting hospitals. And for many facilities, the costs are negating bonuses they received for outstanding performance in other Medicare programs.

Looking at numbers

This year’s value-based purchasing program was successful for some hospitals, but not others. Many hospitals received penalties right off the bat. Out of over 3,000 hospitals participating in the program this year, 1,360 facilities lost Medicare reimbursement due to poor performance in certain areas, including patient satisfaction scores and mortality rates.

Although 1,700 hospitals earned bonuses for providing value-based care, few will actually get extra money from Medicare due to their low performance in other care quality programs, including the initiatives designed to lower readmissions and infection rates.

According to Kaiser Health News, when combining all of Medicare’s incentive programs, the average bonus for large hospitals (or those facilities with over 400 beds), is $213,000. Meanwhile, the average penalty is $1.2 million.

Smaller facilities with 200 or fewer beds don’t fare much better. The average bonus for these hospitals is around $32,000, but the average penalty totals $131,000.

Bottom line: Fewer than 30% of hospitals will either break even or get extra money from the feds.

And hospitals’ budgets will be strained even further this year by other penalties, including not meeting federal requirements for electronic health records (EHR) systems under the meaningful use program.

Which states did best

When breaking performance down by state, at least 75% of hospitals in the following states received bonuses:

  • Alaska
  • Hawaii
  • Maine
  • Minnesota
  • Montana
  • Oregon
  • South Dakota, and
  • Wisconsin.

Over half of the hospitals participating in the program received penalties in the following states:

  • Arizona
  • Arkansas
  • California
  • Connecticut
  • Delaware
  • Florida
  • Nevada
  • New Jersey
  • New York
  • North Dakota
  • Pennsylvania
  • Washington, and
  • Wyoming.

More than half of participating hospitals in Washington, DC also received penalties.

How hospitals can respond

If your hospital’s performance is lacking this year, and you’re stuck with a large financial penalty, now’s the time to review your facility’s patient safety protocol to see where you can improve.

Because part of the value-based purchasing program evaluates hospitals against the performance of other facilities in their geographic area, keeping up with what your competitors are doing can tell you where you should place your focus going forward. It may be a great idea to look at the successes these facilities have had in implementing EHRs, reducing infection rates and keeping patients from being readmitted within 30 days.

Another area facilities should evaluate: cutting costs. This past year, Medicare added a new metric to the value-based purchasing program that measures whether hospitals provided the most cost-effective care they could to patients.

The feds calculated the cost each facility incurred to care for the average patient. They compared this number to the performance of other facilities over an 18-month period from 2012-2013. And then they looked at how this number compared to the hospital’s performance two years ago.

Hospitals received a bonus for cutting the cost of patient care – and were penalized if the cost was too high when compared to other similar hospitals in their area.

So if your facility isn’t looking at how it can cut back on waste when it comes to patient care, it’s time to give this area more attention.

Future outlook

Overall, these numbers should serve as a wake up call to hospitals. Not keeping up with the trend toward value-based purchasing will cause your bottom line to suffer. As Medicare moves to a pay-for-performance structure, other payors are bound to follow suit. That means there’s more than just Medicare reimbursement at stake for most facilities.

Despite how your facility performed this year, it’s best to move forward and continue doing what you can to keep patients safe (and happy), while providing quality care at a reasonable cost. In the not-too-distant future, every hospital’s survival will depend on it.

To stay motivated, keep this in mind: Most hospitals don’t get penalties every year.

According to the article, in the three years since Medicare implemented the value-based purchasing program, only a quarter of facilities evaluated lost money each year. Another quarter earned bonuses each year. The others received a mix of bonuses and penalties.

So a facility’s fate isn’t set in stone – and that means hospitals should use their current ranking as motivation to improve, even if they’re doing well.

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