How R.Ph.s help hospitals get paid for performance

July 10, 2006

Financial incentives go a long way for just about everybody—including hospitals. A groundbreaking pay-for-performance demonstration project, implemented by the Centers for Medicare & Medicaid Services in October 2003, proves it. The agency recently announced that hospitals participating in its Premier Hospital Quality Incentive program "significantly" improved their quality of care. To show its appreciation for a job well done, CMS has awarded $8.85 million to hospitals that showed measurable improvements in patient care during the first year of the program.

Financial incentives go a long way for just about everybody—including hospitals. A groundbreaking pay-for-performance demonstration project, implemented by the Centers for Medicare & Medicaid Services in October 2003, proves it. The agency recently announced that hospitals participating in its Premier Hospital Quality Incentive program "significantly" improved their quality of care. To show its appreciation for a job well done, CMS has awarded $8.85 million to hospitals that showed measurable improvements in patient care during the first year of the program.

Pharmacy operations have changed significantly in the hospitals recognized for their enhancements. For example, "We've improved communication in the pharmacy by reworking communication procedures, such as having pharmacists sign off to other pharmacists," explained Natasha Nicol, Pharm.D., director of pharmacy at McLeod Regional Medical Center in Florence, S.C., one of the top hospitals receiving funds for its quality improvement initiatives. "We also have individual notebooks on each floor so that the pharmacists have very specific information on each patient. They know where to go if anything occurs with a patient, no matter what time of day." A drug list, which details specific drugs patients are on, is easily accessible to pharmacists through the hospital's information system and can be instantly printed if needed. "At a quick glance, the pharmacists can be on the floor and know what patients are on which specific high-risk drugs."

In CMS' efforts to improve the quality of care for its Medicare beneficiaries, the largest and most obvious venue to evaluate is hospital care, explained Mark Wynn, Ph.D., director of the division of payment policy demonstrations for CMS. Hospital care is "the most expensive single portion of the Medicare program and certainly the place where the most acutely ill Medicare beneficiaries are," he said. "That is why we wanted to do what we could to improve the quality of care in hospitals."

CMS is working in collaboration with Premier Inc., a nationwide alliance of about 1,500 not-for-profit hospitals and healthcare organizations, to execute the program. This is the first program of its kind in which Medicare is awarding monetary bonuses to healthcare providers in a pay-for-performance demonstration.

Criteria to measure the improvements are evidence-based and are expected to provide long-term benefits, including cost savings, fewer complications, and fewer readmissions.

A total of 34 measures of quality of care are evaluated in the program in the following five clinical areas:

  • acute myocardial infarction (AMI)
  • heart failure
  • community-acquired pneumonia
  • coronary artery bypass graft (CABG)
  • hip and knee replacement

Each of the five diagnoses has between five and 10 evidence-based quality measures, explained Wynn. "We collect data on each measure, rolling the data into an aggregate calculation for each of the five clinical areas. To those hospitals that do the best in each of the five clinical areas, we give a 1% or 2% bonus incentive payment on top of their regular Medicare diagnosis-related group (DRG) payment." CMS then categorizes the distribution of hospital quality scores into deciles to identify top performers for each of the five conditions.

Hospitals in the top 10% for a given condition were given a 2% bonus on their Medicare payments for that condition. Hospitals in the second 10% were given a 1% bonus. Hospitals in the remainder of the top percent received recognition for their quality of care but no bonus.

At the end of the first year, with more than 260 hospitals voluntarily participating, baselines were set for the bottom 20% and the bottom 10%. A hospital that falls below the 10% baseline in the third year of the demonstration gets a 2% reduction in Medicare payments for the clinical area involved. Those who fall between 20% and 10% get a 1% reduction. However, in a statement released by CMS, officials anticipated that "most hospitals would exceed the baseline level and that few, if any, would get a payment reduction."

The $8.85 million bonus has been distributed as follows:

  • AMI: $1,756,000 to 49 hospitals
  • Heart failure: $1,818,000 to 52 hospitals
  • Pneumonia: $1,139,000 to 52 hospitals
  • CABG: $2,078,000 to 27 hospitals
  • Hip and knee replacement: $2,061,000 to 43 hospitals

Hackensack (N.J.) University Medical Center and McLeod Regional Medical Center, Florence, S.C., were both in the top two percentages for all five clinical areas, and Fairview Lakes Medical Center, Wyoming, Minn., was in the top percentage for all three areas it measured. Hackensack also received the largest award for a single area measured—$326,000 for CABG care. It also earned awards in other areas, making its total bonus $847,000. The second-largest award went to Bone and Joint Hospital in Oklahoma City, which received $249,000 for its hip- and knee-replacement procedures.

Hackensack's infrastructure includes service lines for each area of care. The facility employs eight clinical pharmacists who come to the job with expertise in various patient care areas. Each clinical pharmacist attends the service-line meetings in his or her specified area of expertise, such as the cardiac service line. The hospital has a service line for each of the five patient care areas measured and includes a clinical pharmacist on the service-line team.

For example, "there may be order sets that need to be revised. Those types of tasks benefit greatly from the input of a clinical pharmacist," explained Steven Aragona, director of pharmacy. "We also have an infectious disease clinical pharmacist who serves on that service line committee to help with issues and set standards and policies such as how to get the appropriate antibiotics started on time. Having the right people available to do those tasks is key to success."

Nicol added that the overall improvement initiative also beefed up her staff's continuing education. "We started a journal club in the department, in which all of the pharmacists are doing reviews of the most upbeat popular literature in our professional journals. The entire pharmacy staff comes together and discusses new topics, new disease stages, and new interactions."

Some 39 smaller hospitals with fewer than 100 beds also participated in the demonstration. Top winners in the smaller hospital category include Mariner's Hospital, Tavernier, Fla., which received $6,000 for its pneumonia care, and Watauga Medical Center, Boone, N.C., which received $4,400 for its AMI patient care. Hospitals use the funds at their discretion to continue their quality improvement initiatives.

"We are working with our partners in the quality-improvement community to share and apply lessons learned," said Mark McClellan, M.D., Ph.D., CMS administrator. Indeed, preliminary data from the second year of the program indicate that quality scores are continuing to improve for all participating hospitals, including lower-performing hospitals, and that the variance between top and bottom performers is decreasing as well. The program is scheduled to end in September 2006.

"We are delighted with how well the demonstration turned out," said Wynn, "and we're vigorously continuing to work on our pay-for-performance demonstrations and developments."

THE AUTHOR is a writer in the Atlanta area.