Billion-Dollar Hospital Bonuses Not Seen Improving Health

The chief executive officer of an HCA-owned (HCA) hospital recently went undercover, wearing a two-day- old beard and a baseball cap to pose as a patient entering his hospital. His goal: spot service flaws and get them fixed.

The covert mission was part of a bid to win some of the almost $1 billion in government payments for hospitals with top ranked service. Across the U.S., the program is encouraging tidier rooms and quieter hallways at the more than 3,000 hospitals that participate in “patient experience” surveys.

As welcome as those improvements may be, numerous studies based on earlier attempts to tie bonuses to performance suggest such incentives may do little to improve care. Rewarding hospitals based on patient’s experience could also have unforeseen repercussions, doctors and economists say. Such incentives, for example, may harm patients most in need of care by discouraging hospitals from treating the elderly and the mentally ill, they say. Hospitals also have concerns.

“Patients who are critically ill, they’re less likely to rate hospitals as highly as those going home with a healthy newborn,” Nancy Foster, vice president for quality and patient safety policy at the American Hospital Association, the industry’s main lobby group, said in an interview.

Photographer: Matthew Staver/Bloomberg

An HCA Inc. facility in Colorado. Close

An HCA Inc. facility in Colorado.

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Photographer: Matthew Staver/Bloomberg

An HCA Inc. facility in Colorado.

Paying Differently

The surveys are part of a broader shift by the federal government and private insurers to pay doctors and hospitals based on performance rather than numbers of tests and procedures. Insurers are counting on the shift to help lower costs, said Karen Ignagni, chief executive officer of America’s Health Insurance Plans, the industry’s lobbying group.

“Right now, the way the tradition fee-for-service program has worked is it is a piece-rate system, body part by body part,” Ignagni said today in an interview. “You get paid for how much you do and you are incentivized to do more.”

Under the bonus plan, the federally funded Medicare program for the elderly is withholding 1 percent of payments, or an estimated $964 million in fiscal 2013, to hospitals. The U.S. will pool the money and mete it out to hospitals based on how they score on a number of benchmarks related to clinical care and patient surveys. The pool will increase to 2 percent of Medicare payments in 2017.

Patient Surveys

Thirty percent of the bonuses will be determined by the 32- question patient experience surveys and the remainder will be linked to how well they meet such clinical measures as pre- operative procedures. The surveys, which may be done by phone or mail, include questions about cleanliness of rooms, how quiet it was at night, if pain was well controlled, and whether doctors and nurses communicated well.

“The patient experience surveys are directly measuring the patient experience with care, communication with nurses, did they understand their medications,” Patrick Conway, chief medical officer for the Centers for Medicare & Medicaid Services, said in an interview. “Asking patients directly is the best way to measure care.”

The Cleveland Clinic is using noise meters to make sure hospital corridors are quiet at night and giving doctors role- playing exercises to improve communication with patients. Nurses are supposed to check every hour to ask whether patients need anything from pain medication to help going to the bathroom.

“This is not arbitrarily making patients happy, it’s about how we practice health care,” James Merlino, chief experience officer at the Ohio-based clinic, said in an interview. “If you improve the way nurses communicate, medical errors go down. That’s a driver of quality.”

Under-Cover Reviews

HCA Holdings Inc. (HCA), the biggest U.S. for-profit hospital operator, has directed some housekeeping staff to inform nurses if patients need anything and encouraged CEOs and management teams to become “secret shoppers” by posing as patients.

A study of Massachusetts doctors found that patients who had insurance plans that paid doctors a bonus for improving patient health saw the same gains as those whose insurer didn’t offer any extra payments, according to the research published in Health Affairs in 2008. The payments ranged from $10,000 for a small practice to $2.7 million for one of the state’s largest doctor’s groups with most doctors getting less than $2,000 each.

No Benefit

In the U.K., the country’s health system started in 2004 paying primary-care doctors as much as 25 percent more for meeting a set of quality metrics, including lowering patients’ blood pressure. While most doctors met these standards, researchers found no change in blood pressure control or treatment and there was no decline in heart attacks, strokes or deaths, according to research published in the British Medical Journal in 2011.

In some cases, doctors may be finding ways to manipulate the system, especially those that link bonuses to patient care, said Steffie Woolhandler, a professor of public health at CUNY School of Public Health in New York who has researched the effects of incentives on health care. With blood pressure, doctors can take multiple measurements and record the lowest one or round down, she said.

Woolhandler has also heard of clinics that schedule appointments based on whether someone has high blood pressure or not. If a patient’s blood pressure is under control in October, the doctor could delay the follow up appointment until January to make sure they don’t get a higher reading that year.

‘Gaming’ System

“If you are paying people based on some sort of scoring system you encourage gaming of the system,” Woolhandler said. “You get things like in Great Britain where on paper it looks like you are improving quality except when you go to measure blood pressure in the population there is no difference.”

Research also casts doubt on the effectiveness of tying Medicare payments to bonuses. In one study, death rates at hospitals eligible for a 1 percent to 2 percent boost in Medicare payments declined at the same rate as those not getting the performance bonus. The findings, published in the New England Journal of Medicine, looked at an experimental program by Medicare in which more than 200 hospitals were paid based on how they scored on 30 measures of care.

While Medicare touts that hospitals in the program improved their quality based on the areas measured by 18.6 percent, researchers found no evidence that the care at those hospitals improved more than at others not in the program and that it didn’t translate into fewer deaths over six years.

Questionable Measures

“We have to admit, we haven’t really found the right measures,” said Dan Ariely, a professor of behavioral economics at Duke University in Durham, North Carolina. “There is a question of whether the things we can measure and reward physicians for are exactly what we want.”

At Beth Israel Deaconess Medical Center in Boston, where many students at Harvard Medical School are trained, Kenneth Sands, senior vice-president of health care quality, said the current pay-for-performance systems for measuring quality health care are flawed on how they measure quality of treatment and on patient satisfaction.

For example, hospitals can be penalized for having a patient get an infection following surgery even if the infection was contracted at another hospital. Or they can see their pay cut if a patient is readmitted even though the hospital has little control over whether the patient took their medication and got the recommended follow-up care. The hospital could do poorly on a patient survey if the doctor didn’t give the pain medication or sleeping pills that a patient was demanding.

Sands said hospitals can also manipulate the system because they are providing the data used to measure themselves. Hospitals could improve their scores, for example, by telling their doctors how to word events, such as how to describe an accidental puncture of a vein during surgery, so it won’t show up in quality reports.

Such concerns aren’t slowing the sprucing up of the nations hospitals in search of a slice of almost $1 billion in bonuses. At the HCA hospital, the undercover CEO “was able to see things the way patients do,” Jonathan Perlin, chief medical officer at Nashville, Tennessee-based HCA, said in an interview. “I can assure you every ceiling tile with a water stain got replaced.”

To contact the reporters on this story: Shannon Pettypiece in New York at spettypiece@bloomberg.net; Stephanie Armour in Washington at sarmour@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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