Medicare’s quality incentive program for hospitals, which provides bonuses and penalties based on performance, has not led to demonstrated improvements in its first 3 years, according to a federal report released Thursday.
The Government Accountability Office examined the Hospital Value-Based Purchasing Program, one of the federal health law’s initiatives to tie payment to quality of care. Earlier this year Medicare gave bonuses to 1,700 hospitals and reduced payments to 1,360 hospitals based on their mortality rates, patient reviews, degree of improvement, and other measurements.
While the payments to a majority of the nation’s hospitals have been affected each year, the audit found the financial effect has been minimal. Most hospitals saw their Medicare payments increase or drop by less than half a percentage point. In the fiscal year that ended Sept. 30, 74% of hospitals fell within that range, with a median bonus of $39,000 and a median penalty of $56,000, according to the analysis.
Safety-net hospitals, which serve more poor patients, tended to do worse than did hospitals overall, but that difference has decreased over the life of the program, the report said. Hospitals with the strongest balance sheets tended to do better than other hospitals did, the report found: Those with a net income margin of more than 5% received average bonuses of 0.23%, while hospitals basically breaking even financially on average did not earn any extra payments.
The Centers for Medicare & Medicaid Services did not respond to the report. Officials have previously stressed that financial incentives like these will have a long-term effect by focusing hospitals more on quality.
The report said that even before the program began in October 2012, hospitals had been improving in how consistently they followed basic clinical guidelines, such as performing blood cultures before giving patients antibiotics. That improvement continued but did not increase with the advent of the financial incentives. The same was true for patient ratings, on such items as the quality of communication from doctors and nurses, and for mortality rates for heart attack patients. Heart failure and pneumonia death rates stayed roughly the same.
“Our analysis found no apparent shift in … quality measure trends during the initial years of the program, but such shifts could emerge over time as the program implements planned changes,” the GAO wrote.
The report noted patient readmission rates began to decline in 2010, when the health law was passed. It said that might be due to a separate Medicare penalty program, also created by the health law, which focuses only on readmission rates. Those penalties will hit 2,592 hospitals over the next 12 months, with the worst performers losing 3% of their regular Medicare payments for each patient stay.
“The conjunction of the drop in hospital readmission rates and the introduction of a financial incentive program targeting those rates provide some additional indication that financial incentives … may, under certain circumstances, promote enhanced quality of care,” the report said.
Kaiser Health News is a nonprofit national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation. KHN’s coverage of aging and long-term care issues is supported in part by a grant from The SCAN Foundation.