Exploring Episode-Based Approaches for Medicare Performance Measurement, Accountability and Payment Final Report. Where Differential Payment Policies Exist, the Focus is on Reporting of Performance


Differential payments to providers currently reflect additional payments for reporting rather than actual performance.  As of July 2008, Medicare had pay-for-reporting programs in place for the hospital inpatient, hospital outpatient, and home health settings; these programs require providers to voluntarily report on a defined set of performance measures or forego two percentage points of their annual payment update.  Additionally, as part of FY 2008 IPPS hospital payment regulations, Medicare embedded quality performance in a limited fashion into its hospital reimbursement policy, by ruling that it would no longer reimburse hospitals for the additional costs associated with certain preventable conditions (CMS, 2007).  The Medicare Physician Quality Reporting Initiative (PQRI), initiated under the Tax Relief and Health Care Act of 2006, provides a financial incentive (a bonus) of up to 2.0 percent of total allowed charges for covered Medicare physician fee schedule services to physicians who voluntarily report on a minimum of three clinical quality measures during the reporting period.  The PQRI results are not made publicly available at this time, whereas the results of the hospital inpatient and the home health reporting programs are shared with consumers on the Medicare Compare websites.  In the future, some or all of these programs may transition from pay-for-reporting to pay-for-performance programs, in which providers would be paid differentially based on actual performance rather than the reporting of measures. 

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