Why Patients Need More than Reduced Healthcare Spending

June 08, 2016 - Is lower healthcare spending truly tied to improved quality of care among hospitals? New research published in Health Affairs begs to differ when it comes to rewarding lower quality hospitals that achieved a reduction in healthcare spending.

The Centers for Medicare & Medicaid Services (CMS) awarded hospitals participating in the Hospital Value-Based Purchasing program financial incentives for both improving the quality of care and reducing healthcare spending. However, the federal agency has rewarded hospitals that have shown subpar quality while reducing costs, according to the report.

CMS looks at infection rates and patient surveys when assessing the quality of care provided at a hospital, Kaiser Health News reported. The federal agency also looks at the costs of care during treatment and recovery. The study looked at 231 hospitals awarded financial incentives and found that their quality of care was average but their healthcare spending was half of the costs among other facilities participating in the program.

“High-quality low-spending hospitals received the greatest financial benefit from the program,” the study authors wrote. “In this respect, CMS achieved its goal with the new spending measure. However, some low-quality hospitals received bonuses because of their low spending.”

Currently, CMS has established within the Hospital Value-Based Purchasing program that healthcare spending will count for 20 percent of the financial bonus, penalty, or regular payment that a hospital receives. This means that hospitals that have quality below average still qualify for bonuses if their Medicare spending is below the median.

However, these bonuses were only 0.18 percent higher in Medicare payments for each patient stay on an annual basis. Nonetheless, the Hospital Value-Based Purchasing program may need revision if it is awarding hospitals that provide subpar quality of care. Regardless of reduced healthcare spending, patients and families deserve quality medical care and strong health outcomes in the twenty-first century.

The lower-quality hospitals awarded these bonuses also displayed elevated rates of death from pneumonia, heart failure, and heart attacks, according to Kaiser Health News. Patient surveys also exhibited unfavorable ratings especially with regard to communication and pain management.

The report did find that the majority of hospitals that received bonuses did reach better than average quality performance measures. A statement from CMS also mentioned that the federal agency would consider changing their scoring system so that hospitals with reduced healthcare spending but subpar quality do not receive these bonuses in future years.

While the Hospital Value-Based Purchasing program may need revision, other programs set up by CMS seem to hold medical facilities accountable to the quality of services. For example, the Medicare Shared Savings Program does not reward accountable care organizations if quality of care is subpar despite reduced healthcare spending.

In fact, the way accountable care organizations are managed has shown to lead to improved quality among medical facilities. Clif Gaus, the President and CEO of the National Association of ACOs, spoke more on the topic in an exclusive interview earlier this year.

“It’s a hard journey and the quality goals for achieving and keeping savings are very high relative to fee-for-service. There’s two different standards here and learning to transform care and provide efficient and better quality takes time,” began Gaus.

“The ACOs have shown that, in the first three years, they’re able to improve the quality. They both provide higher quality and they’re quality-improving from year to year. That’s a home run. In some respects, that’s been the real success story of ACOs. That’s a great story for beneficiaries,” Gaus continued.

“We’re trying to convince CMS that higher-performing ACOs on the quality side should get a better share of the savings. This makes sense. Medicare Advantage rewards the MA plans for achieving high quality. CMS doesn’t reward ACOs for quality. If you’re perfect, you get to keep what you save. If you’re not perfect, you lose some of the money you save. It’s a reverse incentive from MA plans and we’re trying to fix that.”

Recently, CMS has  established a final ruling for the Medicare Shared Savings Program in which accountable care organizations will need to reach local cost benchmarks instead of national levels. No longer will national data be the primary benchmark as ACOs could rely on regional levels instead. This new ruling will be incorporated when accountable care organizations sign up for second or third year contracts.

The federal agency is continually attempting to reform its programs in order to improve patient health outcomes and quality of care. As such, it would be beneficial to change its scoring methodology within the Hospital Value-Based Purchasing program to align with quality of care despite any reduced Medicare spending among hospitals. This would work much in the same way that accountable care organizations currently operate.

As CMS and the federal government continue to reform the healthcare industry, hospitals and payers will need to work alongside to ensure the Triple Aim of Healthcare is achieved.

Dig Deeper:

4 Steps Toward Reforming the Medicare Program, Lowering Costs

How the SMART Act Resolved Medicare Secondary Payer Issues