Hospitals’ Medicare funds at risk

Beginning this week, hospitals across the country are getting judged by the U.S. Department of Health and Human Services on how well they serve their patients – and in New York City, the result is likely to be millions of dollars in lost federal funding.

Under the new “pay for performance” rules of the Centers for Medicare and Medicaid Services, hospitals that uphold high standards of care and have well-treated, satisfied patients will see financial rewards, while those that fall short will be penalized up to 2 percent of their Medicare reimbursements for each patient they treat under the federal health insurance program for the elderly and disabled.

New York City’s 40 rated hospitals are not likely to fare well. Preliminary data, based on surveys taken between 2008 and 2011, show that if the program had been in effect, all but two facilities would be financially penalized for lackluster scores. The average penalty citywide, just short of 1 percent, is more than three times higher than the national average. Other large cities faced far lower penalties — .41 percent for Los Angeles and .79 percent for Chicago.

Click chart below to see how all of New York City’s 40 rated hospitals fared in Medicare evaluations that will cost them millions



Only two hospitals in New York City would avoid penalties, according to the preliminary data. The worst performing, beleaguered Wyckoff Heights Medical Center, would see a 1.7 percent reduction to its crucial Medicare repayments.

While the percentage may sound small, in 2010 almost a third of the 324-bed hospital’s $690 million in patient revenue came from Medicare-insured patients. Were the penalty already in effect, the hospital would lose hundreds of thousands of dollars in federal funding. For a hospital in deep debt, that’s a serious hit.

Officials at Wyckoff Heights declined to comment for this story.

Wyckoff Heights Medical Center in Brooklyn will lose Medicare funds under a new incentive program tied to performance — as will most New New York City hospitals. Photo: Curtis Skinner

Hospitals are set to learn by the end of this month exactly how much of each reimbursement for patient care they’ll lose from now until next October. These cuts also come at a time when the state’s Medicaid payments to hospitals for inpatient care have been reduced by 2 percent and Congress races to avert an across-the-board cut of 2 percent to Medicare by January.

The financial incentives are part of the federal Affordable Care Act, which seeks to lower costs while getting more value for the funds spent. The measures aim to improve care by offering incentives to centers that improve care and enforcing penalties on hospitals that don’t.

Hospitals are being evaluated on quality of care, patient satisfaction and the rate of reentry in the month after discharge. The data has been collected by the Centers for Medicare and Medicaid Services for years, but this will be the first time that the numbers will be used to punish or reward hospitals. The initiative is  part of a larger push for accountability across the health care system.

“Changing the way we pay hospitals will improve the quality of care for seniors and save money for all of us,” said U.S. Department of Health and Human Services Secretary Kathleen Sebelius in a press release when the agency launched the initiative last year. “Medicare will reward hospitals that provide high-quality care and keep their patients healthy. It’s an important part of our work to improve the health of our nation and drive down costs. As hospitals work to improve their performance on these measures, all patients – not just Medicare patients – will benefit.”

As much as 1 percent of a hospital’s Medicare reimbursements for hospitalized patients will depend on readmissions rates for the prior three years compared to national averages. Those that consistently have worse rates than average will receive a penalty. Nationally, about 15 percent of patients cycle back to a hospital within a month of discharge, according to a congressional advisory council, costing the program $17.5 billion for remedial care.

Up to another 1 percent will be gained or lost based on quality of care and patient satisfaction, as weighed against a hospital’s own history and national averages — what Medicare administrators call “value-based purchasing.”

The stakes will only grow in the future as the funds in play grow: hospitals will gain or lose up to 3 percent of their Medicare reimbursements for readmissions performance by October 2014, and as much as 2 percent for quality of care by 2016.

Supporters of the incentives have applauded the Obama administration’s efforts to increase quality of care.

“The purpose of all these policies is not to punish folks for performing badly. It’s to help them so that they can work well and reward them for that,” said Stuart Guterman, vice president of the Payment and System Reform program at the Commonwealth Fund, a health policy research group. “It helps promote better care for the vulnerable populations that these facilities treat and can pay off in the long run.”

He argued that the practice until now — under which the Centers for Medicare and Medicaid Services pay a set fee for clinical services regardless of how the patient fares afterward — fails to hold hospitals accountable for bad care. “One could argue that the current system pays for performance; it’s just the wrong kind of performance,” he said.

But the new policies have their critics too. One recent report published in the Archives of Internal Medicine showed that value-based purchasing would likely harm “safety-net hospitals” — medical centers that serve low-income and uniquely unhealthy populations – at a much higher rate.

“One of the problems is that everyone is competing against each other instead of against themselves and their peers,” said Karen Joynt, a Boston cardiologist and policy researcher at Harvard’s School of Public Health. “This should be an incentive that makes hospitals want to learn from each other, and I think the problem might be that the under-resourced hospitals don’t know how to get better. It’s just sort of blaming the victim and it’s a little short sighted.”

The uneven impact of penalties is one reason New York City hospitals are likely to perform so poorly. The Commission on the Public’s Health System, a public hospital and health advocacy group based in the city, found that about half of the city’s 43 acute-care hospitals could be considered safety-nets based on the percent of Medicaid recipients and uninsured patients that they serve.

But government officials argue that lowering the bar for these medical centers lowers the standards of care for the most vulnerable populations.

“We believe how we measure quality of care should be the same regardless of socioeconomic status, and many hospitals that treat low-income patients have performed well on these measures in the past,” said Jeffrey Hall, a regional spokesman for the Centers of Medicare and Medicaid services, in an email.

“We are using the measures that have been endorsed by the National Quality Forum. The NQF does not support risk adjusting for socioeconomic status because it can create a lower standard of quality for hospitals that treat a higher proportion of patients with low socioeconomic status.”


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