August 20, 2007

Brought to you by Thomas Jefferson University’s Department of Health Policy

Volume II, Number 31

Medicare Cuts Reimbursement for Poor Quality Care

Starting late next year, Medicare will not pay hospitals to treat certain conditions associated with
health care mistakes or complications. The government estimates that denial of Medicare reimbursement
for bed sores, catheter infections, air embolism, falls and objects left inside of patients during surgery will
result in annual savings of $20 million. The American Hospital Association (AHA) had proposed a
narrower list of conditions, saying that some bed sores and hospital-acquired infections occur even with
top-notch care. The Consumers Union applauded the new rules, and spokesman Michael McCauley said,
“we think it is going to be a very powerful incentive for hospitals to improve care, and also a way to
contain costs.” (PND News Brief, 8/13/07, Wall Street Journal, 8/8/07, CMS)
AHRQ Report on Preventable Hospitalizations
More than 4 million hospital stays could possibly be avoided according to a new report conducted
by the Agency for Healthcare Research and Quality (AHRQ). By improving the quality of primary care,
enhancing patients’ access to effective treatments and getting more Americans to adopt healthy
behaviors, this could be accomplished. Based on data from its Healthcare Cost and Utilization project, the
Agency estimates that $29 billion - one out of every 10 dollars of total hospital expenditures - was spent
on hospital care for potentially preventable conditions. Over the 7-year period from 1997-2004, hospital
costs for these potentially preventable conditions increased by 31 percent, adjusted for inflation, while
hospital admissions for these conditions increased by only 3 percent. For more information on this study
visit the AHRQ website. (AHA News Now, PND News Brief, 8/13/07)
My Care counts Call to Action
The American Hospital Association released a “call to action” last month to inform Congress that
Americans support their local hospitals. This online drive encourages hospital leaders, employees and
businesses among others in their community to sign the petition to oppose cuts that can threaten hospital
services. Medicare and Medicaid reimburse at a lesser rate than the cost of providing the services;
therefore, these cuts can not be tolerated. Let Congress know that you care about the healthcare you
receive by visiting My Care Counts. (AHA News Now, 8/13/07)
Value-Based Purchasing Strategies Pay Off
Massachusetts, Minnesota, Washington, and Wisconsin were highlighted in a recent report out of
the Commonwealth Fund. These states have implemented initiatives to pursue value-based purchasing
(VBP). They are emphasizing the collection of quality-of-care data, encouraging transparency of quality
and cost information, and providing incentives. Some of the approaches being used to accomplish these
goals include; tiered premiums, pay-for-performance measures, and the designation of high-performance
providers as "centers of excellence." The Massachusetts Group Insurance Commission (GIC) is utilizing
a tiering system based on quality and efficiency. This system requires plans to offer their members
different levels of cost sharing, which is dependent on the tier to which the hospital or provider is
assigned. The group from Minnesota is developing their own VBP strategies. Washington State's Puget
Sound Health Alliance is developing performance reports and the group from Wisconsin is pursuing a
state-wide health data repository. The strategies used to accomplish VBP in these organizations includes
uniform quality measurement and reporting requirements, transparency, public reporting, and direct
incentive-based strategies. The promising results provide anecdotal evidence that these strategies are
working, but it is important to remember that VBP is one component of the broader effort to improve the
performance of health care systems. (Commonwealth Fund, 8/15/07)

Any questions regarding this newsletter can be directed

to Valerie Pracilio at valerie.pracilio@jefferson.edu or
Bettina Berman bettina.berman@jefferson.edu.