When the Affordable Care Act came into effect in 2010, it introduced the Pay-for-Performance (P4P) Program, which consists of three main categories—the Hospital Readmission Reduction ProgramHospital Value-Based Purchasing Program, and the Hospital-Acquired Condition (HAC) Reduction Program—to evaluate hospitals and incentivize them to provide more affordable, more efficient, and safer patient care.

The Hospital-Acquired Conditions (HAC) Reduction program penalizes hospitals with too many infections, blood clots, cases of sepsis, bedsores, hip fractures and other complications making them compete for the lowest number of cases. The 25% of hospitals with the highest number of cases end up being punished despite improvements from previous years.

This year, 110 hospital will be penalized for the fifth straight time. But in total more than 800 hospitals is paid less be Medicare as they fall within the 25% of hospitals with the most preventive cases such as hospital acquired infections. Since 2014, a total of 1,756 hospitals have been penalized for having an unacceptable level of quality making 2018 the year with the most penalties.

But what does it actually mean to be penalized according to the HAC program? Each hospital will lose 1% of its Medicare payments for patients discharged between last October and this September, which is followed up payment reductions for hospitals with too many readmissions in accordance with the health care law.

Imagine, for example, that a typical mid-sized hospital has annual revenue of approximately $325,000,000.5 The HAC Reduction Program concerns revenue derived only from inpatient care, which comes to approximately $162,500,000 (roughly half of total hospital revenue). Of inpatient revenue, around $65,000,000 (40%) comes from Medicare reimbursement. If the hospital’s HAC score places it in the lowest-performing 25%, triggering a 1% reduction in Medicare reimbursement, then that’s a loss of $650,000 for the year. Practically speaking, that means the hospital has $650,000 less, at minimum,6 to spend on upgrading equipment, expanding services, and hiring and keeping the best-qualified staff.

The European situation

Should European healthcare systems enforce a similar penalty for the 25% of hospitals with the most hospital acquired infections? It sounds like an effective incentive for them wo work on preventing hospital acquired infections and might drive down costs significantly yet according to The American Hospital Association there is downside to the medal. Hospitals that do the best job testing for infections and other threats to patients appear to be among the worst based on statistics, while their more lackadaisical peers look better than they might be. For this to succeed there needs to be standardized mean to measure infection rates. It is no secret that the effort put into measuring the occurrence of hospital acquired infections in hospitals around Europe varies significantly. While some countries claim that only 4% of their patients have a hospital acquired infection others, such as the Nordic countries have a staggering 7-10% infection rates.

Penalty vs. transparency?

What if instead of penalizing hospitals with hospital acquired infections, merely enforcing them to calculate how much they spend on them would make hospitals take stronger measures on prevention?  Today, hospitals do not know how much they spend on hospital acquired infections. The cost is tangled into the total expense of treatment as prolonged hospitalization, increased medication and additional surgeries.

Do you think making cost of hospital acquired infections more transparent incentivize hospitals to prioritize infection prevention more or is penalties the better approach?