Medicare’s New Performance Measures Are Bad News for Hospitals

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Congress has yet to enact health care reform that will successfully reduce costs without threatening the quality of care patients receive. Obamacare attempted to achieve this by moving Medicare from a system that pays for the volume of services to one that pays for value. But in fact, the new health law will simply enable bureaucrats to arbitrarily define and reward provider performance, resulting in negative unintended consequences for providers.

Beginning in 2012, Medicare’s new Value-Based Purchasing program will go into effect. In the program’s first year, hospital reimbursement will be reduced by 1 percent, and the $850 million this generates will be used to pay providers based on performance.  Hospitals will be scored both on their performance and improvement, and payment will vary based on the higher of these two scores. Thirty percent of performance payments will depend on patient satisfaction surveys, which will report how well hospital employees communicated, how well caregivers responded to patients’ needs and explained medications, and how clean and quiet the hospital was.

A recent article by Kaiser Health News writer Jordan Rau highlights some hospitals’ hesitations about the changes. Since surveys do not necessarily measure the quality of care that patients receive—and factors that are out of providers’ hands can affect patients’ perceptions—many hospitals argue this measure should not weigh so heavily on payment.

Dr. James Merlino, the Cleveland Clinic’s chief experience officer, said, “Focusing on patient satisfaction is the right thing to do, but it’s also necessary we pick the right metrics and we hold hospitals accountable for things within their control.”

A number of variables unrelated to hospital performance can influence survey responses. Rau writes, “Partly linking payments to patient satisfaction may hurt hospitals in regions where patients tend to render less-than-glowing judgments, including the District of Columbia, Maryland, New Jersey and Hawaii. The District and New York State rank at the bottom: 59 percent of patients in both places give their hospital experiences a top rating, lower than anywhere else except the Virgin Islands.”

New York City has three of the nation’s best teaching hospitals—Beth Israel Medical Center, Mount Sinai Medical Center, and NYU Langone Medical Center—yet all three received scores well below average. Jaclyn Mucaria, a senior vice president at New York–Presbyterian, said the reason could be “[T]hat we New Yorkers are very hard to please, whether it’s in a hotel or a restaurant or a hospital. For somebody to really rave about something is an anomaly.”

Empowering bureaucracy to define and reward value will allow hospitals that provide high-quality care to receive unjustifiably lower payments. Research shows that while performance measures improve compliance with what is measured, they generally do little to improve health outcomes. Indeed, schemes using financial incentives to reward value—as defined by a removed third party—can cause more harm than good. The fact is, value simply cannot be defined by an algorithm or a simple survey. Its definition will vary for every patient.

This post was co-authored by Amanda Rae Kronquist, who is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit:

Source material can be found at this site.

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