Paying Hospitals More For Quality Fails Test

Tom Emerick

Posted 4/05/12 on Cracking Health Costs

There has been a proposition that if we just pay providers more money to motivate better quality, good things will happen.  That has always been a dubious proposition in my view.  Then again I’ve managed over 2500 direct contracts between employers and hospitals.

The notion is that if you give more money to poor performing providers they will take better care of patients.  While that is a worthy idea to consider, I’m not so sure.  We have 40 centuries of economic history.  Empirically, we know it works better to send more patients to high performers, not more money to second-rate performers.

An article in Kaiser Health News show the results of a failed effort to achieve better quality through higher payments.  “Medicare’s largest effort to pay hospitals based on how they perform — an inspiration for key parts of the health care law — did not lead to fewer deaths, a new study has found.”  Click here to read full article.

Further, “The study casts doubt on a central premise of the health law’s effort to rework the financial incentives for hospitals with the aim of saving money while improving patient care.”

The best hospitals with the best outcomes are often less costly per episode of patient care.  Throwing money at second-rate hospitals is not the answer.

Part of the answer is finding ways to steer employees to hospitals that do it right already.  You will win if you send more patients to the good ones.

One thought on “Paying Hospitals More For Quality Fails Test

  1. No Duh!
    Why would paying more to a poor performing hospital improve care?
    Would paying $8 for a gallon of gas improve the cars miles per gallon?
    Stop playing games with healthcare dollars and let the market wean out the poor or underperformers.

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