NCPA - National Center for Policy Analysis

Hospitals Chase Medicare Performance-Based Bonuses

February 20, 2013

Jonathan Perlin, the CEO of the largest for-profit hospital company in the United States, went undercover as a patient to discover what it was like to be a customer. Hospitals across the country are making similar attempts to improve the quality of patient stays, a move that is aimed at capturing some of Medicare's performance-based bonuses, says BusinessWeek.

  • The federal Medicare program for the elderly is withholding more than 1 percent of payments and awarding the pool of money to those that meet the federal government's expectations.
  • A projected $964 million in fiscal year 2013 will be withheld from more than 3,000 hospitals.
  • $300 million will be awarded based on patient surveys and the remaining sum of money will be awarded based on clinical measures.

Patients will be asked whether the room was comfortable, if it was quiet all night, how their pain was controlled, if attendants were friendly and how long the waits were. Hospitals do not yet know how much money they could receive from high marks but Sheryl Skolnick, managing director at CRT Capital Group, a company that tracks hospital performance, says that it could mean millions for larger hospitals.

  • Numerous studies, including one conducted on the United Kingdom's national health system, indicate that efforts to tie bonuses to doctor performance may not lead to any increase in the quality of care.
  • Instead, bonuses for reaching a variety of goals are most likely to improve the quality of hospital food and pillows.
  • A 2008 study of Massachusetts doctors revealed that doctors who receive incentives to improve the overall health of their patients saw no better results than doctors who received no bonuses.
  • Analysis of other studies that suggest modest increases in quality care or deductions in the mortality rate are attributable to overall trends in the health care system, not bonuses.

Source: Shannon Pettypiece and Stephanie Armour, "Hospitals Chase Medicare's Performance-Based Bonuses," BusinessWeek January 31, 2013.


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