A voluntary initiative to report hospital quality data would become de facto mandatory if congressional Medicare reform negotiators approve a plan they were considering last week.
The proposal to link hospital payment increases to quality reporting efforts would represent a dramatic change in how Medicare compensates hospitals. It would also represent another step toward CMS Administrator Tom Scully's vision of rewarding the hospitals that provide higher quality care.
"When you have a payment incentive of this magnitude it could represent hundreds of thousands of (additional) dollars, if not millions, for selected institutions," said Kenneth Raske, president of the Greater New York Hospital Association.
Raske said he has been in regular contact with members of the House-Senate conference committee that has been trying since July to reconcile the two chambers' versions of Medicare reform legislation.
Under the payment plan conferees discussed last week, hospitals that participate in the industry's voluntary quality initiative with the CMS would receive a full inflation update from Medicare in 2004 and the following three years. Hospitals that do not participate would receive an update 0.4 percentage points below inflation in the latter three years.
More than 1,790 hospitals have agreed to participate in the quality initiative, through which they report data to the CMS on 10 measures of quality for heart attacks, heart failure and pneumonia. The program was launched last December by the Association of American Medical Colleges, the American Hospital Association and the Federation of American Hospitals.
However, the most recent CMS figures showed that only 415 hospitals had reported data. Disappointed with that participation, Scully recently threatened to make the program mandatory for hospitals (Oct. 13, p. 8).
An AHA official said the proposal to tie participation to a full inflation update was a positive development because the association supports the quality initiative and is "delighted" by the movement toward giving hospitals a larger payment increase in coming years than negotiators had previously discussed.
As for whether the conferees' proposal would amount to making the voluntary initiative a mandatory one, Raske said, "It kicks it up a notch," adding that if hospitals don't participate they would not be exercising their fiduciary responsibility.
A CMS spokeswoman said Scully is observing a "general press boycott" during reform negotiations and declined to comment. He has been a regular at meetings of the conference committee, which were held every day last week and often lasted into the night.
Attempting to push the committee toward an agreement, President Bush made Medicare the focus of a speech last week as conferees continued their work. "I'm optimistic the House and the Senate negotiators will produce a bill that brings real savings to millions of seniors, and real reform to Medicare," he said.
Some Washington observers wondered why members of the conference committee did not show up to hear the president's remarks. White House spokesman Allen Abney said no members of Congress were invited because "it was an event to talk to seniors about Medicare."
Last week, conference negotiators continued their hesitation to disclose many details of the policies they're considering. Asked if the committee had decided to tie hospital payment increases to strides in quality, Sen. Max Baucus (D-Mont.) said, "We're very, very close."
Other lawmakers used similar phrases to characterize the progress being made by the committee, which at one point hoped to complete a bill to present to the full Congress by Oct. 17.
Also high on hospitals' priority list is how the Medicare bill would address the indirect medical education adjustment that teaching hospitals receive to offset the costs of training physicians. Those funds represent a percentage add-on to the Medicare prospective payment system rates based on a ratio of residents to beds.
According to the AHA and other sources, conferees last week considered raising the adjustment to 6% from the current 5.5% beginning April 1, with adjustments of 5.8% in 2005 and 5.5% in 2006. In 2000 major teaching hospitals posted inpatient margins of almost 23%, according to the Medicare Payment Advisory Commission, the highest margin of any hospital category.