CMS proposes linking hospital performance to Medicare reimbursements.

[Source: Health and Life Sciences Law Daily, November 27, 2007 - AHLA]

CQ Healthbeat (11/27, Carey) reports, "The Centers for Medicare and Medicaid Services (CMS) on Monday sent a series of options to Capitol Hill to change Medicare hospital payment so that it is based on the quality of care a facility delivers." Building on the existing Medicare "Value-Based Purchasing Program," which "pays hospitals more Medicare money if they report data on various performance measures designed to assess quality," a "percentage of the hospital's base operating payment for each discharge -- its 'diagnosis related group' or DRG payment -- would depend on its quality performance." Kerry Weems, CMS acting administrator, suggested that Congress could potentially implement the proposals "as a savings tool."

The Wall Street Journal (11/27, D3, Francis) described the report as offering "sweeping changes to the way" CMS "reimburses hospitals, outlining a plan that would essentially redistribute cash by reducing payments across the board and then giving providers a chance to 'earn back' money by meeting quality-of-care thresholds." However, "Some health-policy experts warn that incentive programs can backfire if structured poorly." Currently, "Medicare makes up nearly half of some hospitals' revenues, and many operate on razor-thin margins." In 2005, 50 percent of "hospitals netted less than 3.75 percent, according to a study by Cleverley and Associates."