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Does Medicare's Hospital Penalty System Have Real Teeth?

January 2, 2013

Starting this year, Medicare will begin it most extensive efforts yet to penalize hospitals for their medical mistakes or poor care. In addition to penalties, the government will also provide bonuses to those hospitals who demonstrate a record of routinely following the standard of care. The purpose behind the government's program is to encourage hospitals to improve patient safety through financial penalties and rewards. However, does this program really have the teeth to significantly improve patient care?

According to records released by Medicare, the maximum amount any hospital can gain or lose is 1% of its regular Medicare payments. Thus, the most dangerous hospital in the country, the ones most likely to commit medical malpractice, will still receive no less than 99% of its Medicare payments from the government. Likewise, the safest hospital in the country, the one least likely to commit medical negligence, can receive no more than a 1% bonus from Medicare.

Based on Medicare's scoring system, Auburn Community Hospital in New York received the largest Medicare penalty in the country. Auburn's lowest score included giving the wrong antibiotic to post-surgical patients 11% of the time. However, under Medicare's penalty system, the hospital will incur a.9% cut in Medicare payment. Because the cut represents $100,000 of Auburn's $85 million budget, the hospital is able to fully absorb the penalty without having to take any drastic measures, according to its COO.

What about the hospital that received the biggest bonus from Medicare? Medicare will reward Treasure Valley Hospital of Boise, Idaho with a .83% increase in payment for each Medicare patient. Treasure Valley's CEO credits its Medicare bonus to paying close attention to patients, which includes a low nurse-to patient ratio and handwritten thank-you notes to patients.

According to healthcare expert Harold Miller, it is doubtful the amount of money at stake is enough to change the way hospitals function. "It's better than nothing, but it's not what is necessary..." Indeed, for struggling hospitals to improve patient safety, a maximum 1% penalty or bonus in Medicare payments is hardly a sufficient incentive, in and of itself, to prompt dramatic changes in patient care. Over coming years, perhaps Medicare will put more weight behind its penalties and bonuses. Otherwise, its program will be perceived as just another ineffective government program.

Sources Used:

Medicalpage Today, Medicare Lists Hospital Quality Bonuses, December 22, 2012

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