Hospitals seeking financial incentives and rewards for investing in quality improvement can find a few of them in the Medicare reform law, but most won't be in force for a year or two and will involve spending money to gain benefits.
The most prominent provision increases Medicare payments by the full rate of healthcare inflation in fiscal 2005 through 2007 in return for reporting data to the CMS on 10 measures of quality for heart attacks, heart failure and pneumonia. Hospital organizations that do not join the quality initiative will get a payment increase 0.4 percentage points below the inflation rate.
Other provisions authorize matching grants for investment in electronic prescription drug programs; exempt hospitals and other sponsors from certain antikickback laws to get the e- prescription movement going; and establish a federal loan pool to encourage construction, renovation or capital improvement of facilities engaging in cancer research and treatment.
In addition, a sprinkling of demonstration projects aimed at testing incentives for better-quality care represents the beginning of a CMS-led effort to spur deployment of clinical information technology and measurable improvement in health outcomes by paying extra for defined levels of performance and IT capabilities.
The decision to link hospital payment increases to quality reporting efforts, an idea that came to light last month during House-Senate conference committee deliberations, marks a fundamental change in how Medicare compensates hospitals. Under the direction of its top official, the just-departed Tom Scully, the CMS had embarked on a campaign during the past year to reward hospitals that provide higher quality care.
An American Hospital Association official last month called the idea of a payment differential a positive development in part because the full inflation update represented a larger payment increase than congressional negotiators had previously discussed (Nov. 3, p. 8).
Because of budget-cutting priorities and other issues, Congress has granted hospitals the full update for healthcare inflation only twice in the past 15 years, an AHA spokeswoman says.
The price of getting the full update is having the technology and reporting structure necessary to gather and report data on the 10 targeted clinical protocols to the CMS by a deadline of Nov. 1, 2004.
But the consensus in the industry is that the effort required to report the data "is not a heavy lift for hospitals," says Herb Kuhn, vice president of advocacy for the Premier hospital alliance.
By contrast, the reward can be sizable for some healthcare systems, he says. For example, an executive from a healthcare organization Kuhn would identify only as "a major system" told him the difference between the two payment rates is about $1 million per year. All this, of course, is contingent on Congress bucking historical trends and keeping promises of future reimbursement updates.
In other Medicare quality-related areas, a section of the law that lays out a plan for electronic prescriptions includes several incentives to increase physician participation but also establishes a standards-development timeline that delays the start of the program until 2008. The law calls for HHS to develop, adopt or modify a set of standards by September 2005, conduct pilot tests during 2006, report the results in 2007 and publish standards by April 1, 2008. The healthcare industry will have one year to put those standards into effect, but participation will be voluntary.
Despite the long process, the willingness of the federal government to set the stage is important, says David Roberts, director of public policy for the Healthcare Information and Management Systems Society. "It's a leadership issue. It shows how important this is." Some healthcare organizations will get started early using available technical and policy signposts, Roberts predicts.
Subsidies for physicians to blunt the cost of technology for e-prescription information transfer total $50 million in 2007 and "such sums as may be necessary" for 2008 and 2009, according to the legislative text. The provision gives special consideration to doctors serving a disproportionate number of Medicare patients, especially in rural or underserved areas. But applicants would have to contribute at least 50% of the costs.
The law requires HHS, in consultation with the U.S. Justice Department, to provide hospitals, medical groups and prescription drug plans a safe harbor from criminal and civil sanctions for giving free goods and services to staff physicians and other prescribing health professionals.
Kuhn called the provision "one of the little nuggets that people haven't discovered and could be significant." The exemption from antikickback and physician self-referral laws applies only to costs related to implementing computerization and training people to use it for sending and receiving prescription information. But it removes a barrier hospitals have encountered in trying to connect doctors to computer networks, and "it's an exciting opportunity that should not be missed," he says.
Providers anticipating federal help in financing the infrastructure for electronic health records and other clinical information systems will have a wait on their hands.
Two preliminary research projects for which the CMS has done "pre-work," according to a spokesman, made it into the Medicare reform law: a three-year program using health information technology at four sites to test pay-for-performance concepts, and a five-year run of pilot tests that examine factors behind improving patient care, including incentives for patient-safety practices and appropriate use of best-practice guidelines.