No Patient Left Behind: Administration Announces Pay for Performance Plan

By Berlinger, Nancy | The Hastings Center Report, September-October 2003 | Go to article overview

No Patient Left Behind: Administration Announces Pay for Performance Plan


Berlinger, Nancy, The Hastings Center Report


One of the hottest trends in efforts to improve patient safety has been to focus on improving specific procedures or practices through financial incentives. The Leapfrog Group, for example, was created by Fortune 500 executives to promote "discrete forward leaps" in health care quality by enlisting large purchasers of health plans (such as Fortune 500 corporations) to monitor hospitals' quantifiable progress in three practices--computerized prescriptions, evidence-based referrals, and staffing in intensive care units. Hospitals that make "leaps" in these practices are rewarded financially, as purchasers pledge to alert their employees to those hospitals that have met Leapfrog's safety standards.

Recently, the Washington Post reported that the Bush administration is preparing to launch a pay-for-performance initiative of its own. Under this plan, hospitals that meet thirty-five quality measures relevant to five conditions--heart attack, heart failure, pneumonia, bypass surgery, and hip and knee replacements--will be rewarded through higher Medicare reimbursements. As with private quality initiatives like Leapfrog, "report cards" on each hospital will be available on the Internet, both as a boon to consumers and as a spur to private insurers to link their payments to performance. During the three-year pilot phase, which involves 550 hospitals in the Premier system, the Centers for Medicare and Medicaid Services (CMS) will pay $21 million in performance bonuses to those hospitals scoring in the top 10 to 20 percent on the quality measures; hospitals that do not improve will be financially penalized. If the pilot program is successful, it may lead to the wholesale restructuring of Medicare to become a pay-for-performance system, according to Tom Scully, who directs the CMS.

The administration's proposal has been endorsed by influential consumer and purchaser groups such as the AFL-CIO and the American Association of Retired Persons. Some health care professionals familiar with, and generally supportive of, incentive-based quality improvement initiatives such as Leapfrog are more cautious in their preliminary assessments of this initiative. Carol Bayley, a clinical ethicist who serves as vice president for ethics and justice education at Catholic Healthcare West, the largest nonprofit healthcare system on the West Coast, concurs that incentives-based programs like Leapfrog tend to help good hospitals become even better. But she is concerned that making Medicare into a pay-for-performance system may wind up hurting those consumers who already have the fewest health care choices: those who live in rural areas or in the inner city. …

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