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News Release

HHS TO LAUNCH MEDICARE DEMONSTRATION TO PROMOTE
HIGH QUALITY CARE IN HOSPITALS

HHS Secretary Tommy G. Thompson today announced a new Medicare demonstration program that will use financial incentives to encourage hospitals to provide high quality inpatient care.

The demonstration involves Premier Inc., a nationwide organization of not-for-profit hospitals, and will reward participating hospitals that provide high quality care by increasing their payment for Medicare patients. Participating hospitals will report quality data that CMS will use to determine high-performing hospitals.

"We are expanding our hospital quality initiative by creating a new demonstration program that will actually reward hospitals with higher Medicare payments when they deliver the best quality care," Secretary Tommy G. Thompson said. "There is no more pressing concern for the American health care system than improving the quality of care we provide. Improving quality of care not only enhances patients' lives. It saves lives."

Under the demonstration, a hospital can receive bonuses based on quality measures selected for inpatients with specific clinical conditions: heart attack, heart failure, pneumonia, coronary artery bypass graft and hip and knee replacements. Measures include prescription of aspirin for heart attack and bypass graft patients and timely administration of antibiotics for pneumonia patients, which are commonly accepted as relevant to improved outcomes.

Hospitals will be scored on the quality measures related to each condition, and those hospitals in the top 10 percent for a given condition will be given a 2 percent bonus on their Medicare payments. Hospitals in the second 10 percent will be given a 1 percent bonus. Hospitals in the remainder of the top 50 percent will be given recognition for their quality but no bonus.

Medicare will pay bonuses totaling $7 million per year for a total of $21 million during the life of the three-year demonstration. HHS' Centers for Medicare & Medicaid Services (CMS) will oversee the demonstration.

"The costs of this demonstration will be partly offset by reductions in medical costs, especially in reductions of unnecessary hospital readmissions because of better care in the initial inpatient stay," CMS Administrator Tom Scully said. "At the same time patients will be getting better care, so everybody wins, the patients, the hospitals and the Medicare program."

Information about participating hospitals' performance under the demonstration will be posted on the CMS Web site and made available to health care professionals and consumers.

Premier Inc. is a group purchasing organization of about 1,500 hospital facilities. About 500 of those facilities currently track and report quality of care data through Premier's system. Premier expects about 300 hospitals to participate in the Medicare demonstration.

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Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

Last Revised: July 10, 2003