The CMS said initial results of a Medicare pay-for-performance project indicated that financial incentives to reward hospitals for quality care work as intended -- resulting in better care and fewer complications. Median hospital quality scores improved in the first year of the project for all five clinical conditions tracked: coronary artery bypass, heart attack, heart failure, hip and knee replacement, and pneumonia. The median performance composite score for all hospitals went up 7.5%, according to hospital alliance Premier, which is co-sponsoring the three-year demonstration project with the CMS. CMS Administrator Mark McClellan said hospitals in the top 20% of each clinical category can expect to receive their Medicare incentive payments in September, after the CMS audits and validates the initial performance data. McClellan said the project so far showed that Medicare could achieve substantial savings through pay-for-performance efforts. "There should be fewer unnecessary hospital readmissions if there is better care in the initial patient stay," he said.
More than 270 hospitals provided data on 34 process and outcomes measures during the initial year of the project, which was launched in October 2003. As the project continues, Medicare will reward high performers with bonuses totaling $7 million per year. Poorly performing hospitals may face financial penalties in the third year. -- by Ralph Loos