NCPA - National Center for Policy Analysis


November 17, 2005

Connecting Medicare hospital payments to the quality of care can "significantly improve" care, according to first-year results of the CMS/Premier Hospital Quality Incentive Demonstration, say CMS officials.

The three-year test program, which began in 2003 and includes 270 hospitals throughout the country, so far has awarded 123 "top performers" a total of $8.85 million, marking the first time Medicare has paid performance bonuses. The program assesses care for Medicare beneficiaries with any one of the following conditions: a joint replacement, coronary artery bypass graft, heart attack, heart failure or pneumonia.

Hospitals participating in the program were evaluated on 33 clinical measures, such as whether patients received proper treatment and the outcome of the procedure:

  • Hospitals finishing in the top 10 percent in a set category were given a 2 percent bonus in addition to their Medicare payments for that category.
  • Hospitals finishing in the top 20 percent were given a 1 percent bonus.
  • Hospitals finishing in the bottom two categories for a condition are required to improve their ratings by the third year or their payments will be reduced by 1 or 2 percent.

According to the researchers:

  • Hospitals? scores for the 33 indicators improved by 7 percent, and nearly all participating hospitals showed some improvement.
  • The lives of an estimated 235 heart attack patients were saved because of improved quality, according to Premier.
  • A similar program for physicians who treat Medicare beneficiaries began this year, the Times reports.

The results indicate that rewarding hospitals more for quality and having them focus on ways to treat patients improves care, says Carmela Coyle, an executive at the American Hospital Association.

Source: Reed Abelson, "Medicare Says Bonuses Can Improve Hospital Care," New York Times, November 15, 2005.

For NYT text (subscription required):


Browse more articles on Health Issues