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Health bills would shift Medicare money to Mayo and other 'high-value' hospitals

Hospitals now have little incentive to be parsimonious, because Medicare revenue is based on the number of procedures performed at a facility. But supporters say a value index -- by rewarding hospitals that spend less per patient -- would provide an incentive to limit procedures.

Proponents acknowledge one problem: Medicare rates will probably be set at a city-wide or regional level, rather than hospital by hospital. That means providers, even if they are efficient, could be punished for being in high-spending areas -- and inefficient hospitals could be rewarded if they are in low-spending areas. But supporters hope the change would encourage providers to better coordinate care, to improve their area's score.

"It's a step forward," said Donald Berwick, head of the Institute for Healthcare Improvement, a Massachusetts think tank.

Complicating factors

But opponents say Congress has bought a flawed sales pitch. They point out that the Midwestern hospitals spend less in part because they serve fewer low-income patients and racial minorities, who have higher rates of diabetes, high blood pressure and other costly conditions.

Opponents cite a new report from MedPAC, the Medicare advisory commission, which found that the spending gap between the Midwestern towns and urban cities such as Boston and New York shrinks when other factors are taken into account, including patients' health status and the fact that teaching hospitals get higher payments and thus appear to be spending more per patient.

Other data suggest that the rankings look much different when all hospital spending -- not just Medicare -- is taken into consideration. In some cases, for example, hospitals that spend little on Medicare charge very high rates to private insurers. "Just because you end up with lower Medicare spending doesn't mean you're efficient," said Len Nichols of the New America Foundation.

While lawmakers from losing states complained about the provision, they were less effective than a well-organized group of Democrats from states likely to gain, including Sen. Maria Cantwell (Wash.) and Reps. Betty McCollum (Minn.), Ron Kind (Wis.) and Bruce Braley (Iowa.).

Now, the focus in Congress is on the precise language that will be included when the House and Senate bills are merged. Both sides agree that the House bill is most favorable to the "high-value" hospitals, because it kicks into gear faster and assigns the task of crafting the value index to the Institute of Medicine, a newcomer to the process, instead of the Department of Health and Human Services, which may be less inclined to radically depart from the system it has administered for years.

Lawmakers in the House who support the use of a value index recently wrote to Speaker Nancy Pelosi (D-Calif.) demanding that their language prevail But whatever the final language, they feel as if they have won.

"The quality-care coalition made clear we weren't going to vote for a bill that continued these disparities," McCollum said. House leaders, she said, "knew they needed our votes to pass this."

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