Bad Practices Net Hospitals More Money

Even though Medicare had no way to reduce its payments to Palm Beach Gardens, it could have removed the hospital from the program entirely. In October 2002, after the "immediate jeopardy" memo, Medicare officials in Atlanta informed Palm Beach Gardens that they proposed to do just that. Such a move could be fatal for any hospital, cutting off one of its largest sources of funds. For that reason, Medicare rarely expels hospitals, even for dangerous care.

The warning to Palm Beach Gardens proved to be no different. Medicare never cut off the hospital's payments. After the hospital filed a "plan of correction," it was back in Medicare's good graces.

State regulators did fine Palm Beach Gardens -- $323,800 in March 2003. But they quickly reduced it to $95,000. Elizabeth Dudek, Florida's top health regulator, said they did so "to avoid what could be a costly and lengthy appeal."

Hospital officials agreed to the fine without acknowledging any wrongdoing. Tenet, the hospital's owner, said in a statement last week that it "would be inaccurate to conclude" that all of the patients who were readmitted came back because of infections acquired during surgery. The company did not give further details about the cases.

Hospital officials have said their infection rate was about equal to the national average and that some results of the inspections were misleading. "There is no aggregate clinical evidence to show that these infections occurred as a result of care provided at the facility," Tenet said in its statement.

In 2004, Tenet settled more than 100 civil lawsuits for $31 million, again without admitting wrongdoing. After suffering a drop-off in business, Palm Beach Gardens is once again busy. The hospital's Web site touts its heart program as among the nation's best.

No Free Glasses

One of the losers in Medicare's payment system can be found near Minneapolis. Amid supersize bookstores and upscale coffee shops, doctors and nurses at the suburban Woodbury clinic tend to nearly 23,000 patients belonging to HealthPartners, the highly ranked Medicare HMO.

As a Medicare HMO, HealthPartners receives a flat fee from the federal health program to provide care to each member, unlike traditional Medicare, in which doctors and hospitals are paid each time they provide a service. Medicare bases that HMO fee in part on what it pays for its traditional fee-for-service members in that region.

The result is that HMOs that happen to be in areas where patients use more services and overall Medicare spending is high are paid thousands more annually per member than HMOs in low-cost areas such as Minnesota -- regardless of how the patients fare.

For example, WellCare, a Miami HMO, receives $11,834 to treat each of its Medicare members. HealthPartners: $7,851 -- a difference of $3,983 per patient per year.

Yet HealthPartners outperforms WellCare on 13 out of 14 Medicare quality measures.

More of its patients get flu shots and colorectal exams. Turnover among HealthPartners' doctors is lower. And patients of the Minnesota HMO -- whose average age is 78 -- report being happier with their care.