The Obama administration said Friday it launched its value-based purchasing plans for hospitals, with nearly a billion Medicare dollars set aside to reward hospitals that meet certain quality measures.

The plan, a pay-for-performance type scheme, aims to pay hospitals for the quality of the care they provide to Medicare patients, and not just the amount of care.

Through the plan, the Department of Health and Human Services hopes to rein in spending on hospitalizations by reducing preventable sicknesses, injuries and readmissions. HHS said one in seven Medicare patients experiences an adverse event in the hospital. In 2009, caring for patients harmed while hospitalized cost Medicare nearly $4.4 billion.
In the current plan, the Centers for Medicare and Medicaid Services will track at least 12 measures of quality known to be linked with better clinical outcomes, such as whether surgical patients get an antibiotic one hour prior to surgery and how many heart failure patients get detailed health management instructions when discharged. CMS will also monitor a "patient experience" metric, such as how clean and quiet the hospital is and how attentive its staff. CMS said the performance period runs from July through March.

Beginning October 2012, $850 million of money that would otherwise have been spent by Medicare for hospital stays will go to pay high-performing hospitals in the value-based purchasing program. HHS said the size of the fund will increase over time, as payments become based more on performance than on volume.

"Changing the way we pay hospitals will improve the quality of care for seniors and save money for all of us," HHS Secretary Kathleen Sebelius said in prepared remarks.

HHS said the initiative, initially called for by the Affordable Care Act, also supports its ambitious Partnership for Patients, launched earlier in the month. The public-private partnership works to reduce adverse events and increase patient safety. The administration reckons over the next three years it can save 60,000 lives and $35 billion in costs to the U.S. health system.

Down the road, CMS said the ACA also calls for other care-improving, cost-reducing measures. For example, in 2013, hospitals will get pay cuts if they have excess 30-day readmissions for heart attack, heart failure and pneumonia patients, the agency said.

And hospitals likely won't be alone in getting a value-based purchasing plan. Earlier this month, HHS submitted a 33-page report to Congress, describing a proposed value-based purchasing plan for ambulatory surgery centers. That program would likely start with setting up a quality data reporting system, according to HHS.

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