Short Takes On News & Events

Medicare’s Pay For Performance Effort Begins, Targeting Quality and Readmissions

By Jordan Rau

October 1st, 2012, 6:06 AM

Monday is the start of the federal fiscal year, and with it begins Medicare’s biggest effort yet at paying for performance.

Starting Oct. 1, Medicare is withholding 1 percent of its regular hospital reimbursements in the new Value-Based Purchasing Program, which was created by the 2010 health care law. Over the course of the year, money will be returned to some hospitals based on how well they follow clinical guidelines for basic care and how they fare in patient satisfaction surveys. Some hospitals will get back some of the money that was held back, others will break even and some will end up getting extra.

Medicare estimates about $850 million will be reallocated among hospitals under the program. The amount will increase in future years and Medicare will add in new measures of quality to the list of measures in place in the program’s first year. Medicare has yet to release specific figures for how much each hospital will be getting back.

Seventy percent of the ratings are based on “process” measures that show how frequently hospitals performed recommended protocols. They are:

  • Percent of heart attack patients given medication to avert blood clots within 30 minutes of arrival at the hospital
  • Percent of heart attack patients given percutaneous coronary interventions within 90 minutes of arrival
  • Percent of heart failure patients given instructions on discharge about how to take care of themselves
  • Percent of pneumonia patients who had a blood culture taken before they were given antibiotics
  • Percent of pneumonia patients that received the correct kind of antibiotics
  • Percent of patients that received an antibiotic within an hour of surgery
  • Percent of surgical patients that received the correct kind of antibiotic
  • Percent of patients who had their antibiotics stopped within 24 hours after surgery ended
  • Percent of heart surgery patients who had their blood sugar kept under control after an operation
  • Percent of heart surgery patients already taking beta blockers who were given a beta blocker just before and after surgery
  • Percent of surgery patients who received treatment to prevent blood clots within 24 hours before to 24 hours after the operation

The other 30 percent of a hospital’s value-based purchasing payment will be based on how it scored on random surveys of patients taken after they were discharged. Those patient experience surveys addressed:

  • How well nurses communicated with patients
  • How well doctors communicated with patients
  • How responsive hospital staff were to patients’ needs
  • How well caregivers managed patients’ pain
  • How well caregivers explained medication to patients before giving it to them
  • How clean and quiet the hospital room and hall were
  • How often caregivers explained to patients how to take care of themselves after discharge
  • How the hospital stay rated overall

Also on Monday, Medicare is applying a separate penalty to 2,211 hospitals with higher than expected readmission rates. Hospitals with the highest rates for heart attack, heart failure and pneumonia patients will lose 1 percent of their regular reimbursements. The Readmissions Reduction Program also was established by the health care law. Medicare expects hospitals together with forfeit about $280 million this year. The maximum penalty grows to 2 percent next year and 3 percent in October 2015.

Kaiser Health News has published the 2013 readmission penalties for all hospitals in a downloadable PDF file. You can look up how a hospital scored on the various process of care and patient satisfaction measures on Medicare’s Hospital Compare website.

8 Responses to “Medicare’s Pay For Performance Effort Begins, Targeting Quality and Readmissions”

  1. randy huffmeister says:

    Gee, what a unique idea! Paying for performance! Does that mean consumers will now get what they pay for when they go to the hospital? That’ll be a first! Hospitals…nothing but a bunch of shysters!

  2. In my opinion, there are five major initiatives needed to fix healthcare:

    1. Digitalize health information, including electronic medical records.
    2. Change compensation from procedures to outcomes and from fee for service to wellness.
    3. Make health insurance a commodity product that is purchased based upon price and the insurer’s reputation.
    4. Enable the industrialization of healthcare by eliminating anti competitive legislation and regulations.
    5. Insure that financial incentives and tax policies are in place to retain healthcare innovation and global leadership in the United States.

    Changing compensation is a critical step as individuals and organizations respond to properly constructed financial incentives. After creating a Vision for the enterprise, the second most important management responsiblity is to construct a compensation system where individuals can meet their own objectives by accomplishing those things that the organization wants them to do.

    We have the greatest doctors and allied health professionals and healthcare in the world. We need to extract the >$1 trillion in annual costs and inefficiencies not directly related with optimal patient care and wellness by sharing cost savings generated by our providers. Payers and insurance companies should not micromanage or second guess our providers. They need to enable information sharing and compensation systems that empower them to deliver the best possible care at the lowest possible cost – and cost should be the overall cost of an outcome not the cost of a procedure or short term patient management.

    This is a great day in starting the move in the right direction…we need to use incentives and best practices, not punitive measures. This will not be perfect and it will not be pretty for some….but over time, competition will drive costs out by rewarding success. The very success that physicians, nurses, and hospitals want to deliver.

  3. Edward says:

    I was with you on the first two but the last three are just more Republican Tea Party spin cycle. Those three steps describe trickle-down healthcare and the consumer keeps begging for crumbs. We need consumer driven healthcare where the patient is king and the provider responds or they get shut out of the market. Patients need the ability to grade providers and those grades result in financial punishment. An example is doctors that refuse treating Medicare patients because it doesn’t pay enough. Those scumbags doctors should shut out of the Medicare market for life.

  4. Jon says:


    Many physicians refuse medicare patients because the cost to the physician exceeds the reimbursement. Put in simple terms that hopefully you will understand, if you are reimbursed less than your cost…eventually you will go out of business. By the way, in case you weren’t aware, private insurance companies follow medicare. So when the govt sets low reimbursement rates, private companies do the same

  5. mary H. says:


    Maybe the person is dire need of understanding just might be you? I totally agree, if docs and other providers can’t afford to treat Medicare patients because they have such an expensive solo practice to run, then they should either stop seeing those patients or find another line of work. Consumers can’t help it if doctors were not trained to be businessmen. Consumers can’t help it if doctors can’t walk and chew gum at the same time. Consumers can’t help it if they can’t be a doctor a run a business at the same time. The reason they can’t is because they still want to hang onto the old fashioned Marcus Welby style of 1950′s medicine where single-doc practices dominated a broken fee-for-service industry. Those days are gone my friend! Wake up and smell the coffee! In case you didn’t know, a new day is dawning. Big-Box ACO’s will be the wave of the future. Wellness and good outcomes will put the patient in charge. Grading doctors and hospitals will weed out the quacks that you’ve been protecting for so many decades. The expense of making mistakes, both at the doctor level and at the hospital level, will no longer be rewarded as the fee-for-service model has done over the past decades. In the future, doctors and hospital will be held to strict account. You screw up, you pay! There will soon come a day when you will wish you had all those Medicare patients that you kicked to the curb. One day, the elderly will call the shots and be grading doctors and hospitals as harshly as they got treated in the past by corrupt doctors and hospitals that only worry about getting wealthy. Nothing but greedy shysters!

  6. Ian says:

    Just wait until you’re battling infections after post surgery and they get your fever under control using a last resort vancomyacin drip or similar, then you leave the hospital only to have the fever come back. Instead of readmitting you, your wonderful government has put penalties in place that will encourage the hospitals to not admit you. Then you die at home of an out of control infection because you were only presenting a 101 degree FUO. Fever unknown origin.

    Sure, they should have gotten whatever ails you under control the first time right? Because the human body is like fixing a car engine or something and always works the same way for every patient. This is how stupid your US Government really is, lawmakers forcing healthcare professionals to hurt patients to stay in business because guess what? Lawmakers are neither experts in business or in healthcare, two prerequisites needed for a hospital to do well financially and for its patients. I’m so tired of idiotic Americans who can’t draw the line between Government inefficiency and their own healthcare. Why don’t these morons move to Canada where their perfect utopia exists and their patients come to the US for critical care? I really wish they would.

    Anyone who thinks the US Government can help this situation by regulating hospitals is either completely incapable of rational thought OR has never worked for the US Government.

    Wait until patients start getting turned away from treatment because this law financially penalizes them for readmissions. Who gets readmitted the most? The people who are the sickest. Hey Barrack. 2 + 2 = 4.

  7. Alex A says:

    Could not help but notice the virulent message from Mary H and a rather generic and equally myopic comment by Edmund L Valentine. They want to “industrialize” healthcare delivery, they want to “put patients in charge” and they feel that doctors are greedy shysters. Industrialized healthcare delivery will result in mediocre medicine for all. Humans are much too complex to follow that approach. Next time you have a serious ailment, you will be eating your own comments in an industrialized medicine world. By the way, electronic medical records have already been tried in the UK and generated no imporovement in the quality of care, nor cost savings. As far as doctors being profit oriented, medical office is a business. A doctor has to cover his/her expenses and earn sufficent compensation to repay up to $400K in tuition spent to become a physician. A doctor should also be allowed to earn above average compensation for 60-90 hr work week (not including being on call 24/7), and above average degree of work-related stress caused by long hours and personal liability for poor outcomes, even in situations that are beyond doctors control (that is the unfortunate effect of our malpractice laws). Let’s face it, to become a doctor one needs to be brighter than 99% of the population. If you want your best and brightest to make personal commitment to quality medicine, you have to pay them accordingly, particularly when we are facing a severe PCP shortage. Not to overuse an old adage, you get what you pay for. And lastly, I am all in favor of empowering patients, but to a point. Regardless of how much research a patient does on internet and how many times he/she re-reads their medical history, they are not qualified to make educated decisions on their healthcare. BTW I am not a physician, but I am a patient.

  8. Dear Alex….I have been called many things but myopic is not one of them….so a new first. My viewpoint is that everything in healthcare is about keeping the patient well. My personal belief is that doctors go into medicine to serve their patients. Nothing I have said is negative about our providers, which deliver the best healthcare in the world. Our systems and processes need attention to extract the $1 trillion in waste that does not contribute to patient care or improves clinical outcomes. We invested $1.8 million last year studying U.S. healthcare and the implicatons of the HIGHTEC Act and ACA on the different segments of the U.S. healthcare industry. As a result, I wrote a book: “Healthcare, Will U.S. Politics Kill Our Opportunity?, We also made the basic data which was utilized to arrive at my conclusions, “Multi-Trillion Dollar U.S. HEALTHCARE TO 2020 Gold Rush”, Both are available via

    I spent 7.5 years in the Army, am an ex-Green Beret Captain, was wounded four times in combat and have multiple medals for valor, including four Bronze Stars and a Soldiers Medal for valor. I am a great believer that the best comes out when everyone gets their opinions out and when people disagree and work toward a concensus. You made some good points….keep pushing your thoughts…I saw and commanded a number of people that were killed so you could do just that…but please do not put words in my mouth.