Medicare Incentives and Penalties: Critical Lessons Learned

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The Centers for Medicare and Medicaid Services is requiring hospitals to demonstrate more and more that they are not only reducing the costs of health services but that they are coordinating care better for patients. Various programs have aimed to do this, including the implementation of computerized patient records, turning to alternative payment models that reward quality over fee-for service, and reporting Medicare patient data on quality and safety measures. 

Those that excel are rewarded, but many hospitals also face penalties. While the national readmission rate is dropping, federal data show that in 2014 a record 2,600-plus hospitals were fined for seeing too many patients return for care within 30 days.

These topics were discussed during a panel Tuesday in the District of Columbia at the U.S. News Hospital of Tomorrow conference, titled “Medicare Incentives and Penalties: Critical Lessons Learned.” Members of the panel included Kim Henrichsen, vice president of clinical operations and chief nursing officer for Intermountain Healthcare; Akin Demehin, senior associate director of policy at the American Hospital Association; and Dr. Elizabeth Mort, senior vice president of quality and safety, and chief quality officer at Massachusetts General Hospital.  

Ellen Lukens, senior vice president at Avalere Health, moderated the conversation. 

  • Panelists discussed the various measures hospitals evaluate, including hospital-acquired conditions, readmissions, and incentive programs for digital health records. 
  • Hospitals that reduced excess readmissions reduced Medicare payments by 3 percent, Demehin said. Data from the American Hospital Association show hospitals saved $420 million in 2016, and more than $1.3 billion in penalties since 2013. 
  • Mort shared that Massachusetts General Hospital’s three overarching goals included leading in quality, improving patient safety and excelling on external surveys and measures. 
  • Henrichsen said that looking at patients’ length of stay involved looking at appropriate length for each.
  • Demehin pointed out, however, that the system can penalize hospitals who serve a disproportionate number of the neediest patients and those with complex conditions. “Some of the differences in patient populations are just not accounted for by the measures,” he said. “Some hospitals are targeting certain groups and doing what they should, but are still seeing readmissions rates increase.” 
  • Mort showed data that requiring hospitals to put their quality measures online for the public to see increased accountability and resulted in improvements. 
  • Mort also said the hospital was focused on administrative burden and burnout, as the new requirements can pile on more work for hospital staff. 
  • Part of delivering better care means getting patients engaged in their well-being. Henrichsen reported that Intermountain Healthcare had changed its mission from strictly delivering excellence in health care to “helping people live the healthiest lives possible.”

The session showed the range of cuts and bonuses from the Centers for Medicare and Medicaid Services, demonstrating both how regulations help improve care but also where regulations themselves could improve. Panelists agreed that more data are needed on the Medicare population, or baby boomers, which will continue to grow as more people age into the system.  

“We don’t have good measures for that population,” Mort said. “The measures tend to focus on the specific disease rather than the patient population.”

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