Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Risk Management News

Are Medicare Pay-for-Performance Benefits Worth the Risk?

By Jacqueline DiChiara

- Medicare pay-for-performance (P4P) incentives are inadvertently averting money away from those financially aching hospitals primarily serving minorities and the economically disadvantaged to instead inflate the revenues of those hospitals serving a more financially prosperous population of patients. Such is confirmed by recent research from David U. Himmelstein, MD, FACP, Lecturer in Medicine at Harvard Medical School and Professor at the City University of New York School of Public Health at Hunter College, and Steffie Woolhandler, MD, MPH, FACP, Lecturer in Medicine at Harvard Medical School, Professor in the CUNY School of Public Health at Hunter College, and Adjunct Clinical Professor at Albert Einstein College of Medicine.

Medicare pay-for-performance incentives

“Medicare’s [P4P] program, which does not adjust for patients’ socioeconomic status, assumes that bonuses and penalties will prod substandard providers to improve or see their patients migrate to higher-quality options,” state Himmelstein and Woolhandler. “However, when quality problems are due to a hospital’s financial distress and patients cannot go elsewhere, penalizing low scorers may well punish patients and exacerbate quality disparities. Prescribing a starvation diet for safety-net hospitals that are strapped for cash and are quality challenged makes no sense unless the goal is to close them.”

Ask Himmelstein and Woolhandler, “Are P4P's benefits worth the risk? The evidence is surprisingly slim. A few small, randomized, controlled trials in outpatient settings have shown improvement on surrogate measures, but most have found no improvement, and none have demonstrated reductions in death or disability rates.”

Hospital administrators “game” P4P arrangements by coercing physicians to embellish diagnoses to beef up their medical outcomes, confirm Himmelstein and Woolhandler. As recently reported, Himmelstein and Woolhandler additionally confirm hospitals are steadily reclassifying Medicare patient readmissions as “observation stays” or delivering care for recurring Medicare patients in the Emergency Room (ER) to thwart Medicare's financial penalties. 

“Researchers who used external data to audit Medicare Advantage plans' ‘safe prescribing’ quality reports discovered that 95% of plans overstate their scores, pushing down the rankings of the 5% who told the truth,” confirm the authors. “At a hospital where we worked, the administration responded to poor scores for risk-adjusted mortality rates by hiring coding consultants, even as it was laying off clinical staff. Within 6 months, risk adjusted mortality rates improved to better than expected and Medicare reimbursement climbed $3 million. Soon after, administrators made physician attendance at coding-coaching sessions mandatory,” they explain.

The recent sustainable growth rate (SGR) fix, they add, will associate 18 percent of Medicare physician fees to cost and quality performance metrics. P4P pressures will “intensify,” they say, as confusion escalates with paperwork befuddlement involving clarity of costs and quality deficits.

Indeed, as Himmelstein confirmed to in a personal interview, paperwork issues are a substantial concern requiring active addressing within the healthcare space: one-third of the total healthcare dollar goes toward paperwork and bureaucracy, he explained. “We are wasting an enormous amount of money that ought to go to healthcare on paperwork … [which is] an extraordinarily inefficient way of deploying resources,” Himmelstein said.

In addition to the notion of possible paperwork chaos, maintaining the integrity of physicians' work is perhaps now in question, the authors add. “Tethering physicians' rewards to box checking and redundant documentation risks both substituting insurers' priorities for patients' goals and demoralizing physicians. Pay for performance can crowd out intrinsic motivation that keeps us doing good work even when no one is looking,” the authors state. “A growing body of behavioral economics research indicates that when preexisting motivation is high, monetary incentives often undermine performance on complex cognitive tasks – particularly when incentives are contingent on specific task performance or associated with surveillance, deadlines, or threats,” they add.

The concept of paying for quality is an attractive option, they confirm. However, the modification of policies “that have been proven nowhere” merely means millions are in severe danger of risk, they maintain.


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