Question

Hospitals are sometimes paid more when patients experience complications (although Medicare has ended reimbursement for some clinical shortcomings). Because incremental revenues are highly visible and incremental costs due to complications are not, hospital administrators may think that clinical shortcomings are not eroding margins. Michard and colleagues (2015) conclude that implementing goal-directed fluid therapy (which significantly reduces complications) would return $2.50 to $4.00 for each dollar invested. In this case, improving quality is highly profitable.

Poor quality reduces hospital profits, even if it substantially increases payments by insurers. And poor quality is a terrible strategy in both the short run and the long run. For example, Gutacker and colleagues (2016) conclude that the elasticity of hospital demand with respect to a typical health gain (measured by the Oxford Hip Score) is 1.4, and the demand elasticities for readmission and mortality rates are −0.02 and −0.004. Poor quality leads to market share losses, and this effect is likely to become larger as insurers increasingly use cost and quality data to try to steer patients to efficient, effective, safe providers (Avalere Health 2017).

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• Is there other evidence that providers profit from improving quality?

• What is Medicare currently doing to measure quality? Safety? Efficiency?

• What are private health plans currently doing to measure quality? Safety? Efficiency?

• What are Medicaid plans currently doing to measure quality? Safety? Efficiency?

• How large are the potential effects on hospital profits of Medicare's value-based payments?

• How large are the potential effects on physician profits of Medicare's value-based payments?

• How will value-based payments from private insurers affect profits?

• How could better quality not cost more?

• What is inefficiency in healthcare? How common is it?

Answer 1

1. Incentive programs are increasingly common internationally. Early incentive schemes tended to focus on processes, as these are generally more straightforward to measure than outcomes and are easier to attribute to the actions of providers. Multiple factors determine the likelihood of a successful outcome, many of which (e.g., age, deprivation, and comorbidity) lie outside the control of the individual physician and therefore require sophisticated risk-adjustment methods to allow for meaningful comparison between providers. However, growing concerns that process measures were too far removed from the intended patient benefits led to a greater focus on outcomes, albeit restricted mostly to intermediate (or surrogate) outcomes, such as blood pressure and cholesterol levels.
2. Medicare’s Quality measures are tools that help us measure or quantify healthcare processes, outcomes, patient perceptions, and organizational structure and/or systems that are associated with the ability to provide high-quality health care and/or that relate to one or more quality goals for health care. These goals include: effective, safe, efficient, patient-centered, equitable, and timely care.
3. clinical care improvement, regulation, accreditation, public reporting, surveillance, and maintenance of certification. Most quality measures are 1 of 3 types: structure, process, or outcome. Health care quality measures should address the domains of quality across the continuum of care and reflect patient and family experience. Measure development for pediatric health care has a number of important challenges, including gaps in the evidence base; the fact that measures for most conditions must be age-specific; the long, resource-intensive development process; and the national focus on measure development for adult conditions.
4. Currently, there are seven measures in the Medicaid set that are not in the commercial set, such as screening of children for lead poisoning, which is of greater concern among children living in poverty. Historically, other measures, such as colorectal cancer screening for older adults, have not been clinically appropriate for the vast majority of Medicaid managed care enrollees, and thus were excluded from the Medicaid set.