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Quality Over Quantity: Big Changes to Medicare

The Obama Administration is enacting big changes in Medicare to reward healthcare providers for quality rather than quantity. Instead of paying a set rate per hospital procedure, the government will now take into account the effectiveness of those procedures – and the resulting health of patients.

The change in policy will provide an incentive for hospitals to increase their quality of service.

For example, under the Hospital Readmissions Reduction Program (part of the Affordable Care Act), Medicare can reduce payments to hospitals with excess readmissions. Such readmissions for high-cost or high-volume conditions (heart attack, pneumonia) usually result from inadequate hospital care.

Other programs include the Hospital Value-Based Purchasing Program, which promotes better clinical outcomes for hospitalized patients, and the Hospital-Acquired Condition Reduction Program, which encourages hospitals to reduce the incidences of conditions acquired by patients from their own hospitals.

The Center for Medicare & Medicaid Services, the federal agency that runs Medicare, will dedicate 30 percent of Medicare’s budget for annual payments to the quality rather than simply the number of services a hospital provides. The CMS aims to increase that number to 50 percent by 2018. This is the first time the CMS has set specific goals and timelines for alternative payment plans.

This is big news, even if you don’t have Medicare. Private insurers are expected to follow suit, since Medicare controls such a large portion of the market – rewarding service providers for value rather than volume will become the new norm.

In fact, the shift to value-based payments has begun already in the private sector. Blue Cross reported last year that 20 percent of their payments were made under value-driven contracts, while Aetna’s value-based payments make up 28 percent of their reimbursements.

The federal decision comes after years of arguments made by policymakers that the US healthcare system needs to emphasize patient health over provider profits. Major trade groups and leaders in the healthcare industry, like the American Medical Association and America’s Health Insurance Plans, fully support this change in policy.

Not only does the CMS hope to improve patient care, but they also hope to reduce wasteful government spending. Medicare’s current fee-for-service system, which costs taxpayers $362 billion last year, rewards healthcare providers for over-providing rather than protecting patients’ health.

In practice, some hospitals have been reluctant to make the shift because they can make more money by charging by the number of services. However, the CMS is not giving them a choice.

This shift is long overdue, as health care spending now makes up one-sixth of the US economy. That number does not reflect patients’ needs, but rather a wealth of unnecessary procedures. Changing from a volume-based to a value-based payment system is expected to reduce healthcare spending overall as well as improve the health of American citizens.

It’s the same reason why we at Freedom Home Care provide hourly in-home services and care with no set minimum of hours – because we want to give you the care you truly need. It’s about quality, not quantity.

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