New-law Medicare payment adjustments kick in

The transition from being paid on a fee-for-service basis to payments based on the quality of care is one of the most challenging financial issues facing hospitals today. Medicare recently disclosed bonuses and penalties for nearly 3,000 hospitals as part of the new healthcare law that holds providers financially accountable for the quality of patient care.

One-percent swing: Medicare is rewarding 1,557 hospitals with more money and reducing payments to 1,427 others, according to a Kaiser Health News analysis of records released by the Centers for Medicare & Medicaid Services. The maximum amount any hospital could gain or lose was 1% of its regular Medicare payments. Over the next four years, that percentage will increase to 2% of all Medicare payments.

The revised payments, which will begin this month, are triggered by the federal health law known as the Hospital Value-Based Purchasing Program and are based on how good of a job providers do with patients.

Hospitals that fared best are not necessarily the ones that are most important in their areas. Rather, the ones that did the best tend to be regional and community hospitals, according to government records. For example, New York-Presbyterian in Manhattan and Massachusetts General Hospital in Boston, both dominant hospitals in their cities, will have their payments reduced. Other leading names in the hospital industry, including the Cleveland Clinic and Intermountain Medical Center in Utah, will receive bonuses, but they will not be the largest in their regions.

Winners and losers: The biggest bonus this year is going to Treasure Valley Hospital, a physician-owned, 10-bed hospital in Boise, Idaho, that is getting a 0.83% increase in payment for each Medicare patient, the records show. Auburn Community Hospital, a nonprofit near Syracuse in upstate New York, is facing the biggest cut, losing 0.9% of every payment.

For most hospitals, the changes are less than a quarter of a percent. Even so, for hospitals with a lot of Medicare patients, it could mean hundreds of thousands of dollars.