Incentives Improve Hospital Quality Measures in CMS/Premier Demonstration

The Centers for Medicare and Medicaid Studies (CMS) hospital demonstration project, conducted in conjunction with Premier, showed that putting incentives in place or reimbursement at risk can significantly improve quality measures.

It is worth understanding how the incentives and scoring were developed and how intensive the process is! The project involved establishing several process and outcome quality measures for each of the five common hospital diagnoses. The indicators were generally based on widely recognized metrics including measures from the National Voluntary Hospital Reporting Initiative (NVHRI), the National Quality Forum (NQF), CMS 7th Scope of Work, the Joint Commission on the Accreditation of Healthcare Organizations (JCAHO) Core Measures, the Leapfrog Group, and the Agency for Healthcare Research and Quality (AHRQ). See “Clinical Conditions and Measures for Reporting” on the CMS Web site for a listing of the measures for each clinical condition.

Developing a composite score for the clinical conditions for each hospital involves:

• Every diagnosis-qualified Medicare patient is scored on whether they were eligible for the indicator and, if eligible, was the measure met.
• A composite for each disease is determined as the number of interventions achieved divided by the total number of opportunities for those interventions.

For additional information on the scoring methodology see "Composite Quality Score Methodology Overview" at the above link.

In year four of the demonstration, 225 hospitals received incentive payments totaling $12 million, or slightly more than $53,000 per hospital. While at first glance this may seem like a significant incentive for top performance, doing the right thing for patients with these common conditions likely resulted in payment reductions for those hospitals (e.g., reducing readmissions) greater than their incentive payments. Hospitals voluntarily participating in the CMS/Premier demonstration are likely motivated to improve quality regardless of the incentives fee-for-service reimbursement creates.

While the impact of this program on a Medicare-wide scale may significantly effect quality measures, in order to move to valued-based reimbursement, both quality and resource use metrics are needed, as well as payments aligned with quality and efficiency.