For most hospitals, penalties wipe out quality bonuses

Medicare will award quality bonuses to the majority of hospitals it assesses, but in most cases, other penalties will offset those gains, Kaiser Health News reports.

Of the hospitals graded, 1,700, or 55 percent, scored high enough on quality reviews to earn increased payments. However, of these hospitals, fewer than 800 will receive any net extra money, according to an analysis by KHN. The rest of the providers will receive penalties under separate Medicare programs because too many patients developed hospital-aquired infections and the organizations failed to reduce readmissions.

The average penalty, at $1.2 million, vastly outweighs the average bonus of about $213,000 for large hospitals, Eric Fontana, an analyst at the Advisory Board Company, told KHN. The gap is smaller for hospitals with 200 beds or fewer, with an average bonus of $32,000 and an average penalty of $131,000. Overall, only 28 percent of the hospitals will either get extra money or break even.

This comes in the same year Medicare began to penalize hospitals for insufficient progress in the transition to electronic medical records. More than 6 percent of Medicare payments are based on performance measures, KHN noted. The Hospital Value-Based Purchasing Initiative is the only program that gives bonuses as well as penalties. A recent study found that safety-net hospitals are particularly likely to receive penalities under the program, FierceHealthFinance reported.

Despite the amount of penalties, the program, now in its third year, saw nearly 500 more hospitals earning bonuses this year compared to last year, according to the KHN report. In 2013, the program reduced payment rates for nearly 1,500 hospitals. 

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