Pay-for-Performance Programs Could Save Medicare $1B Through Improved Quality, Study Says

Tying Medicare hospital payments to quality of care measures would have reduced the program's hospital costs by as much as $1 billion for the care of 75,000 Medicare beneficiaries being treated for pneumonia or receiving heart bypass surgery, according to a study of data from the CMS/Premier Hospital Quality Incentive Demonstration, a project to evaluate pay-for-performance measures in Medicare, CQ HealthBeat reports. The three-year demonstration project, which launched in October 2003, includes 260 hospitals in 38 states. In November 2005, Medicare paid $8.9 million to 123 hospitals that showed significant performance improvements in the first year of the program. The new study examines quality of care measures for pneumonia -- such as checking patients' blood oxygen levels and taking blood cultures before administering antibiotics -- and for heart bypass surgery, such as prescribing aspirin at discharges and correct administering of antibiotics. According to the study, hospital costs for patients receiving the highest level of recommended care for pneumonia were about $8,412, compared with costs of $10,298 for those that received the lowest number of care measures. For heart bypass patients, the cost for patients receiving the lowest number of care measures was $41,539, compared with $30,061 for the highest application of care measures. The study finds that implementing the recommended care measures would have resulted in 3,000 fewer deaths, 6,000 fewer medical complications, 6,000 fewer hospital readmissions and 500,000 fewer days in the hospital.

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Mark Wynn, director of the division of payment policy demonstration at CMS' Office of Research, Development and Information, said his agency will use the findings in determining how to implement P4P measures across the entire Medicare program. Under the budget savings bill signed by President Bush in February, CMS must develop a plan to connect hospital performance to payments by 2009, CQ HealthBeat reports. Richard Norling, president and CEO of Premier, said, "This is compelling proof that improving the process of care can reduce costs while improving outcomes," adding, "These findings benefit patients, hospitals and those who pay the bills" (Carey, CQ HealthBeat, 6/20).