Medicare has revamped its payments to hospitals based on quality indicators. That is the good news. The bad news is that the rewards/penalties involved, as they are currently constituted, are probably not worth the time it would take a hospital to seriously consider the program. The reward for good results is an extra 1% reimbursement. The penalty is a 2% cutback. There are two measures currently being considered, value based health care and readmission rate. If we assume the reimbursement for an average hospital admission for a Medicare patient is $50,000 (which is probably way too high), the penalty could be as high as $1,000. However the revenue for the readmission is likely to be 10 or 20 times the amount of the penalty. It would seem to me that if I were the CFO of hospital it would take a lot more penalty than 2% to create the need for a behavior change.
Of the 25 hospitals in the greater Cleveland area showing currently on Medicare website, only 4 actually received a reward and the biggest reward was only 0.18%.
There are three big problems with the hospital quality programs under Medicare and Health Reform.
- The measurements themselves are being created by special interest groups.
- The amount of the penalties and rewards will not change behavior.
- Patients have not shown much interest in paying attention to the underlying ratings or implications. The biggest driver of choice of hospitals by patients is where their doctor recommends they go. With hospitals owning far more than half of all doctor practices, the doctors standardly recommends the hospitals that own the practices that employ them.
In the coming months we are going to hear a lot about the Medicare quality programs, Accountable Care Organizations
, and Patient Centered Medical Homes. These are all included as part of health care reform. They may sound good in theory but do not expect much out of them. Estimates of savings from all of these programs combined might affect a the cost of family coverage by $300 which is not much when you compare it to the $16,500 per year family coverage will cost in 2013. It is going to take a lot more than this for health reform to deliver on the promise implied by its name, the Affordable Care Act. That kind of creativity is going to have to come from plans. The best benefit savings solutions
will not come from those with a vested interest in the current system.