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WASHINGTON (AP) — Medicare began an experiment Thursday to see whether the promise of more money will translate into better patient care in hospitals, the first time the government has tied payments directly to quality of medicine.

Under the three-year demonstration, hospitals that do the best job caring for patients with five specific conditions will be paid extra. Any that fail to meet minimum standards will lose money.

"Think of it as a bonus system for hospitals," said Health and Human Services Secretary Tommy Thompson. "Just as individuals earn bonuses for high-quality work on the job, we are going to reward hospitals that excel."

The conditions being measured are heart attack, heart failure, pneumonia, coronary artery bypass graft and hip and knee replacements. Each of these ailments is associated with standard care measures that will be used to judge hospitals.

For instance, a hospital will get credit for prescribing aspirin to patients after bypass surgery, but lose credit for every person with a knee replacement who had to be readmitted within 30 days.

Officials hope that the financial incentives, combined with publicity about which hospitals are best, will motivate hospitals to meet certain key quality indicators.

"Providers are very responsive to the public release of information," said Stuart Guterman, director of the Office of Research, Development and Information at the Center for Medicare and Medicaid Services. "Nobody wants to be left off the list."

The experiment is being conducted with Premier Inc., a national chain of nonprofit hospitals. Premier estimates that about 300 of its hospitals will participate.

Hospitals will be scored on a variety of quality measures for each condition. Those in the top 10 percent of all participating hospitals will get a 2 percent increase in reimbursements for that condition. Those in the second 10 percent will get a 1 percent bonus.

Bonuses will total $7 million each year, with the experiment costing $21 million over three years.

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Participants also risk losing money. In year one, quality benchmarks will be set based on all hospitals' performance. In year three, hospitals will have their payments reduced by 2 percent if they perform at a level that would have been in the bottom 10 percent in the first year. Payments will be reduced by 1 percent for hospitals that would have ranked in the next lowest tier in year one.

If all hospitals improve between years one and three, it's possible that none will lose any money.

"We fully hope we don't have to reduce anybody's payments in the third year because that will mean quality has improved enough so everybody's above those thresholds," Guterman said.

Medicare is in the final planning stages for another demonstration that will take quality into account in paying large physician practices, but the real aim of that demonstration is to make the practices more efficient.

Officials said the hospital experiment announced Thursday is the only one to directly tie dollars to quality measures.

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