Quality and Cost Trend Analysis
Using data from Medicare, Premier Pay-for-Performance Project
Executive Summary - 1/31/08
Hospital quality improving, cost, mortality rate trends declining for participants
in Medicare pay-for-performance project
? Hospital quality continues to improve while patient mortality rates and hospital costs are declining
among participants in a Centers for Medicare and Medicaid Services (CMS) pay-for-performance (P4P)
demonstration project, according to a recent Premier healthcare alliance analysis of over 1.1 million
participant patient records.
? According to Premier’s analysis, the broadest of its kind to date, if all hospitals nationally were to
achieve the three-year cost and mortality improvements found in the Hospital Quality Incentive
Demonstration (HQID) P4P participants for pneumonia, heart bypass, heart failure, heart attack (acute
myocardial infarction), and hip and knee replacement patient populations, it could have resulted in:
o Nearly 70,000 fewer deaths annually;
o A reduction in hospital costs by as much as $4.5 billion annually.
? On average, the median hospital cost per patient for participants in the HQID project declined by over
$1,000 across the first three years of the project, whereas the median mortality rate decreased by 1.87
? The 1.1 million patient records represented in this analysis encompass 8.5 percent of all patients
nationally within the five noted clinical areas over the three-year timeline of this analysis.
Clinical Area Improvement
Clinical Area Improvement AMI $1,599
AMI 2.27% CABG $1,579
CABG 0.95% Pneumonia $811
Pneumonia 2.39% Heart Failure $1,181
Heart Failure 1.86% Hip Replacement $744
Average 1.87% Knee Replacement $463 Average $1063
Quality has continued to improve in HQID hospitals
? For hospitals participating in the HQID project, the median Composite Quality Score (CQS), a
combination of clinical quality measures and outcome measures, improved by an average of 17.3
percent across all clinical areas between the inception of the program in October 2003 through
June 2007 (15 quarters).
? The median Appropriate Care Score (ACS), also referred to as “perfect process score” or “all or
nothing score”, to designate when a patient receives all possible care measures within a clinical
area, improved by an average of 52.6 percent across all clinical areas between the inception of the
program in October 2003 through June 2007 (15 quarters).
? When compared to non-participating hospitals, the quality score of hospitals in the HQID project
on 19 publicly reported quality indicators is 6.5 percent higher, indicating that performance
incentives are effective at improving quality of care. HQID hospitals also started at a lower
? In addition, hospitals participating in the HQID project have, over the first two years of the project:
o Saved the lives of nearly 1,300 heart-attack patients.
o Provided more than 150,000 additional treatments that met the highest quality patient care
About the HQID Project
? The analysis is based on data from hospitals in the project with the Centers for Medicare and Medicaid
? Through that project, Premier collects a set of more than 30 evidence-based clinical quality measures
from over 250 hospitals across the country.
? The quality measures were developed by government and private organizations (for more information on
the indicators, go to: www.qualitydemo.com). For instance, the measures for pneumonia are as follows:
1. Oxygenation assessment
2. Pneumococcal vaccination
3. Blood culture before first antibiotic
4. Adult smoking cessation counseling
5. Initial antibiotic selection
6. Initial antibiotic within four hours of hospital arrival
7. Flu vaccination
? The project has been extended by CMS for an additional three years (2007-2009).
? A New England Journal of Medicine study found that hospitals in the Premier/CMS pay-for-
performance project achieved better quality patient care than those hospitals participating in
Hospital Compare – a Health and Human Services-led hospital quality improvement initiative
without financial incentives.
? When compared to the rest of the nation’s hospitals, the quality score of hospitals in the P4P
project on 18 publicly reported quality indicators is significantly higher, confirming that
performance incentives are effective at improving quality of care.
Performance Pays Analysis Methodology
1. Premier Perspective? data was used to calculate quarterly outcomes for the hospitals in the HQID
2. Analyses excluded hospitals with less than eight cases in a quarter.
3. All data was severity adjusted using APR-DRGs.
4. For mortality, risk adjustment was also conducted using the CareScience model which produced similar
th5. All cost data was renormalized to the 4 quarter 2003 timeframe to adjust for inflation using the U.S.
Department of Labor Bureau of Labor Statistics Hospital Services Price Index.
6. Analyzed change in the median hospital value across the twelve quarter timeframe using linear
7. Premier researchers extrapolated the national implications based on discharge data from the Agency for
Healthcare Research and Quality (AHRQ) Healthcare Cost and Utilization Project (HCUP) 2005 data.
About Premier Inc., 2006 Malcolm Baldrige National Quality Award recipient
Serving 1,700 U.S. hospitals and more than 49,000 other healthcare sites, the Premier healthcare alliance and
its members are transforming healthcare together. Owned by not-for-profit hospitals, Premier operates one of
the leading healthcare purchasing networks and the nation's most comprehensive repository of hospital
clinical and financial information. A subsidiary operates one of the nation's largest policy-holder owned,
hospital professional liability risk-retention groups. A world leader in helping healthcare providers deliver
dramatic improvements in care, Premier is working with the United Kingdom's National Health Service
North West and the Centers for Medicare and Medicaid Services to improve hospital performance.
Headquartered in San Diego, Premier has offices in Charlotte, N.C., Philadelphia, and Washington. For more
information, visit www.premierinc.com.