Medicare Penalizes Nearly 1,500 Hospitals For Poor Quality Scores

Nov 15, 2013
Originally published on November 15, 2013 10:49 am

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.

Copyright 2018 Kaiser Health News. To see more, visit Kaiser Health News.


While questions about health insurance have gotten all the attention recently, another part of the new healthcare law has been quietly moving forward. That's a push to improve quality of care and cut costs by setting incentives for hospitals to make structural changes. With hospitals now in the second year of making those changes, more are receiving penalties than bonuses under the new initiative.

Jordan Rau of Kaiser Health News joined us to talk about this quality improvement program.

JORDAN RAU, BYLINE: It looks at three areas of hospitals. One area is whether the hospital follows basic clinical guidelines for stuff you're supposed to do, like giving aspirins to heart attack patients. The second is how patients, after they leave, rate the hospital on things like did the doctors and nurses communicate well and was their pain well handled.

And the third, which is new this year, it looks at the death rates of patients for three very common conditions for the elderly set, which are a heart attack, heart failure and pneumonia.

MONTAGNE: So of those hospitals that are getting bonuses and getting penalized, you've been crunching the numbers. What are the big winners and losers, and why?

RAU: It really varies. There's some state where the hospitals are doing exceedingly well and most of them are getting bonuses: Maine, Massachusetts, Nebraska, North Carolina. And these are states that have a lot of smaller hospitals so they tend to be able to get their arms around these measures and improve.

The worst are big states: California, Connecticut, New York, Washington. And these are states, they have a lot of big urban hospitals which tend to do a bit worse on these measures. Which specific hospital got the largest bonus? Arkansas Heart Hospital in Little Rock.

Now, that's a privately owned hospital that just does cardiovascular surgeries and treatments so they can really focus on those. And the biggest penalty was Gallup Indian Medical Center, which is in New Mexico, right on the border of the Navaho reservation. And that's a very busy, government-run facility that deals with a pretty complex health population.

MONTAGNE: Okay. Where does improvement fit in? Do states and hospitals get points for getting better?

RAU: Yes. Everyone gets measured two ways. One is how they compare to everyone else and the second is how much they've improved over two years. Now, the challenge is that if you're a poor hospital, if ou don't have as many resources to throw at some of these areas to get your scores up, and a lot of the times this can be, you know, financially expensive - I mean some of it, like dealing with mortality rates, is extremely complicated. And so one of the things that we're seeing is that some of the really prestigious medical centers that were sort of surprised to get penalties last year have improved pretty dramatically, are now getting bonuses. But some of the safety net hospitals are not doing as well.

Like Denver Health, which the Obama administration has held up as a model for how you handle large swaths of poor people, it's getting a very hefty penalty this year.

MONTAGNE: It does sound, then, like hospitals in states that won't get money from Medicaid expansion may suffer in this because it does seem as if what counts is not just enthusiasm for improving, but the money to do it.

RAU: That's exactly right. And some of these hospitals that handle a lot of Medicaid patients are really getting hit on multiple fronts. They are getting cut on their federal subsidies for handling those patients and they're also losing money from another quality program which punishes hospitals that have too many patients readmitted.

MONTAGNE: Well, just tell me, Jordan, what changes are coming next year?

RAU: It gets even more complicated next year. They're adding more measures, including one that measures efficiency, basically how cost efficient hospitals are in treating patients for Medicare. And then the second thing is that they've got yet another quality program coming in. It's going to punish the hospitals with the most hospital (unintelligible) conditions, you know.

So if you get a staph infection or something in a hospital or you slip and fall, they're going to lose more money. So all together, really, hospitals have got a lot of different judgments coming on them from the federal government, all which translates into more or less money.

MONTAGNE: Well, thank you very much.

RAU: Thank you.

MONTAGNE: Jordan Rau is a senior correspondent with Kaiser Health News. Transcript provided by NPR, Copyright NPR.