WASHINGTON - The Centers for Medicare and Medicaid Services sought input from consumers, purchasers, provider groups and associations, and other stakeholders as it developed its proposed changes to the Medicare hospital reimbursement system.
Despite the transparent process, CMS's recommendations, released on Monday in a 104-page report to Congress, have met with mixed reviews.
Consumers and purchasers are applauding the proposed changes, said Tom Valuck, director of Special Program Office for Value-based Purchasing at CMS. Leapfrog Group and the Pacific Business Group on Health have submitted letters of support.
CMS's recommendations call for reimbursement payment reductions to all hospitals by 2 percent to 5 percent, with the leftover funds to be used to reward hospitals that meet quality performance metrics.
CMS's pay-for-reporting program for hospitals was the precursor to the proposed changes for the Medicare reimbursement system for hospitals.
"The overall Medicare payment system reform has been long overdue," Valuck said.
Private payers have been adopting pay-for-performance programs, and it's now time for CMS to tie Medicare payment to performance on quality measures, he said.
He characterized hospital response as "cautiously optimistic" because of the uncertainty over the impact to their bottom line.
Despite uncertainty over Congressional action and the fact that CMS's proposals are options and not a specific plan, the American Hospital Association's main concern is with the proposed payment cuts.
"A two to five percent reduction in hospital payments would significantly impact hospitals and patients," said spokesperson Elizabeth Lietz. "It is also unclear how or if that funding would be returned to hospitals."
While rewarding high performers and penalizing low performers is arguably a worthwhile idea, having payers mandate how hospitals should practice medicine is inherently flawed, said Devon Herrick, senior fellow at the National Center for Policy Analysis.
"Hospitals should compete with each other," he said. "My fear is that pay for performance is a very blunt instrument. It doesn't have the discipline or the innovation of the free market."
Herrick pointed out that the hospitals that stand to lose are those in the middle because they would not be rewarded according to the proposed model.
While he gave kudos to CMS for looking for ways to extract better quality out of providers, the agency is not being effective. Ultimately, Valuck said, "It's not clear that you can dictate to hospitals how to practice medicine to improve quality."