Report: CMS Quality Efforts Have Broad Hospital Impact

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By Michael D. Williamson

Aug. 4 — Most hospitals will see a payment reduction under at least one of Medicare’s quality payment programs, according to a report published in the August issue of the journal Health Affairs.

The report examined Medicare's programs on hospital readmissions reduction, value-based purchasing and hospital-acquired condition reduction. Four out of five hospitals subject to the programs will be penalized under one or more of them in 2015, the report found.

The report's authors said that a growing share (6 percent by 2017) of Medicare hospital payments will be dependent upon how hospitals perform under the three programs.

Charles Kahn III, the president and chief executive officer of industry group Federation of American Hospitals (FAH), served at the lead author. The FAH is a trade group representing for-profit hospitals. Other authors included consultants from Health Policy Alternatives Inc., a consulting firm.


A consultant who didn't author the Health Affairs report said the findings show the quality programs are working.

Andrew Agwunobi, a managing director at Berkeley Research Group, told Bloomberg BNA Aug. 4 the report offers two important takeaways.

First, it shows that Medicare's quality programs are working and there are improvements in the metrics the initiatives are measuring, Agwunobi, a former hospital executive, said. However, he disagreed with the report's suggestion that public reporting alone—rather than imposing pay reductions—could have achieved similar results. Part of the problem with relying on public reporting for improving quality is that consumers aren't good at interpreting hospital quality reports, Agwunobi said.

In addition, the report demonstrates that Medicare's pay-for-performance efforts are blunt tools that will need constant refinement, Agwunobi told Bloomberg BNA.

CMS Policies 

The report by Kahn and his co-authors posed some questions for the Centers for Medicare & Medicaid Services to examine to refine the programs. For example, the report asked if incentives for improvement would be greater if all three of Medicare's pay-for-performance programs specifically considered improvements as a part of scoring hospital performance. Currently, the hospital value-based program is the only one of the three to explicitly recognize improvement in hospital performance and achievement of specific targets in determining a hospital's total performance score and payment adjustment.

Also, given the complete overlap in measures for the value-based purchasing and hospital-acquired condition (HAC) reduction program, it is unclear whether a separate HAC reduction program will result in greater performance improvements, the report found.

Academic Medical Centers 

According to Agwunobi, the report missed an opportunity to highlight probable reasons for the findings and in so doing, finding other points for refinement. For example, the report found that major teaching hospitals are more likely to be penalized under all the three measures, but didn't say what caused these providers to be penalized more than others, Agwunobi said.

Agwunobi provided some analysis on what's driving academic medical centers to be penalized more frequently. Academic medical centers are very complex institutions, which affects management’s ability to implement Medicare's quality goals, he said.

In addition, many major academic medical centers lack competency in “efficiency of care,” according to Agwunobi, adding that in many cases, physicians at academic medical centers don’t know what care actually costs.

To contact the reporter on this story: Michael D. Williamson in Washington at

To contact the editor responsible for this story: Brian Broderick at