The federal government paid bonuses to 231 hospitals with subpar quality because their patients tend to be less expensive for Medicare, new research shows.
The bonuses are small, generally a fraction of a percent of their Medicare payments. Nonetheless, rewarding hospitals of mediocre quality was hardly the stated goal when the Affordable Care Act created financial incentives to encourage better medical care from hospitals, doctors and other health care providers.
A study published Monday in the journal Health Affairs looked at the more than $1 billion in payments made last year in the Hospital Value-Based Purchasing program, which raises or lowers Medicare payments to hospitals based on the government’s assessment of their quality. Medicare primarily uses death and infection rates and patient surveys to judge hospitals, but it also evaluates how much each hospitals’ patients cost, both in treatment and recovery.
The 231 hospitals the study identified had below average scores on quality measures but were awarded the bonuses because caring for their patients during their stays and in the 30 days following their discharge cost Medicare less than what it cost at half of hospitals evaluated in the program.
The Centers for Medicare &Medicaid Services, or CMS, began measuring cost in October 2014 to encourage hospitals to provide care in the most efficient way possible. In the period examined in the study – the federal fiscal year that ended in September 2015 – spending counted for 20 percent of a hospital’s score in determining whether a hospital would get a bonus, penalty or regular payment.
Under this formula, hospitals with Medicare spending below the median hospital were able to qualify for bonuses even though their quality measures were below the median, the study found. Patients at those 231 hospitals cost Medicare on average nearly $16,000, about $2,300 less than the average spending for the patients at other hospitals that received bonuses, according to the study’s lead author, Anup Das, a medical and health policy student at the University of Michigan.
The average bonus for those lower quality hospitals was an 0.18 percent increase in Medicare payments for each patient stay during that fiscal year. Most of the 1,700 hospitals that received a bonus that year had higher than average quality ratings, and their patients in some cases were more costly to Medicare.
“High-quality low-spending hospitals received the greatest financial benefit from the program,” the study said. “In this respect, CMS achieved its goal with the new spending measure. However, some low-quality hospitals received bonuses because of their low spending.”
In a statement, CMS said it would consider revising the program for future years so that hospitals scoring below the national median for quality would not receive a bonus. The statement also noted that this year, three-fourths of hospitals’ scores were based on quality measures. “We believe that there needs to be a balanced consideration between quality and cost, which is reflected in our scoring methodology,” the statement said.
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