The Centers for Medicare and Medicaid Services (CMS) will start paying hospitals bonuses based upon performance, an adherence to quality measures, and on patient satisfaction.  These final Medicare rules were published last week. This Hospital Value-Based Purchasing Program is another step toward shifting the reimbursement infrastructure from the cost of services during a hospital stay to improvements in patient health and performance during a hospital stay.

Proponents of this idea — which was part of the Patient Protection and Affordable Care Act — contend it could help save money in the Medicare system as it improves patient care nationwide. “For the first time, hospitals are going to be paid for inpatient hospital quality, not just the quantity of the care they provide,” CMS administrator Donald Berwick, MD, told reporters on Friday morning.

The rule goes into effect in October 2012. In the program’s first year, hospitals will be entitled to share bonus money from an $850 million fund based upon their performance. For a complete list of the quality measures, visit here.  CMS will also evaluate patient satisfaction during hospital stays. Quality measures will weigh at 70% and patient satisfaction results at 30%.

In fiscal year 2013 (starting October 2012), hospitals will face a 1% reduction overall on Medicare payments under the Inpatient Prospective Payment System (IPPS) as these funds will be used to pay for the performance bonuses. By 2015, hospitals who continue to show poor performance ratings will not only be excluded from the bonus pool, they will also face additional cuts in reimbursement.

When asked if the rule would be unfair to hospitals with less money who might have greater challenges adhering to the quality measures and focusing on patient scores, Berwick stated: “We need all boats to rise on the rising tide of quality.”