Medicare Reimbursement Reduction due to Poor Hospital Quality and Patient Safety

Home / Case Study / Medicare Reimbursement Reduction due to Poor Hospital Quality and Patient Safety

While there’s no doubt that federal healthcare programs are beneficial for everyone in need of financial assistance with medical expenses, government funding can only allocate a limited annual budget for this purpose. This is why reimbursement is subject to approval; and with individuals taking advantage of the system’s loopholes, funding is further reduced. It’s also less effective when abused.


The Centers for Medicare and Medicaid Services (CMS) imposed regulations preventing healthcare reimbursement for medical conditions which were acquired during a patient’s stay in a hospital but were not originally present prior to admission. The policy started in October 1, 2008 in response to the Deficit Reduction Act of 2005 which commissioned the Secretary of Health and Human Services to discover what conditions can be prevented in order to similarly prevent increasing health care payments.

Effect on Hospital Quality

Apart from the obvious purpose of federal budget reduction and avoiding abuse of government programs, this policy also affects hospital quality. The effect extends all the way to the hospital organizational structure, down to staff performance, as well as facility improvement.

To prevent hospital acquired conditions that might lead to denial of Medicare and Medicaid payments, the leadership organization will need to include facility-related policies during executive meetings. Adjustments needed include hygienic maintenance of facilities and equipment – particularly, in high traffic areas – as well as wards caring for patients with infectious diseases.

The Centers for Medicare and Medicaid Services (CMS) impose regulations preventing healthcare reimbursement for medical conditions which were acquired during a patient’s stay in a hospital but were not originally present prior to admission.

Patient care quality is also a factor; hence, all staff – particularly, those who are directly involved with patients – must provide quality care. In a previous post, we discussed how turnover and retention is directly related to care provided by nurses. A hospital’s organizational structure and programs for staff impacts the way they work, including interactions with patients. Medical errors and success are also indirectly connected to how employees are compensated.

Programs Related to Medicare Payment Reduction

Payments made to hospitals are based on quality and value. The number of services provided is not a basis.

Here are some of the programs related to reducing Medicare payments:

Hospital Readmissions Reduction Program

This revolves around reducing readmission payments on common and costly conditions like heart attack or heart failure, coronary artery bypass graft surgery, pneumonia, chronic obstructive pulmonary disease (COPD), and hip/knee replacement.

The program aims to lessen these readmission cases by offering incentives to hospitals which provide quality care.

Hospital Value-Based Purchasing (VBP) Program

VBP implements Medicare payments based on performance using various measurements. Some of the factors considered include how they perform by comparison to other hospitals (over 3,000 hospitals across the country) and their performance improvement during a given period.

Hospital-Acquired Condition (HAC) Reduction Program

Medicare payments are reduced for medical facilities which are included among the lowest 25% bracket of poorly performing hospitals for certain standards, as imposed by HAC. Measurements revolve around patient safety improvement, not only the reduction of readmissions, like the programs above.

Programs supporting Medicare reimbursement reduction include the Hospital Readmissions Reduction Program, Hospital Value-Based Purchasing (VBP) Program, and Hospital-Acquired Condition (HAC) Reduction Program.


Process versus Outcome

Process-based payments are slowly becoming extinct as more and more measurements focus on outcome, such as the programs enumerated and explained earlier.

The Inpatient Prospective Payment System (IPPS) is a good example of programs focusing on outcomes instead of processes. It also aims to set a national standard for payments in order to devise effective incentive programs. The IPPS concentrates on outcomes which can be prevented. These include admissions, readmissions, complications, emergency department visits, outpatient procedures and diagnostic tests.

How to Avoid Reduction in Reimbursement Payments

Since most of the programs listed above have specific measurements, it helps to understand the factors at play, such as accreditation programs (i.e. Magnet, Joint Commission).

Organizational and environmental factors both come into play on the same level. The organization includes leadership (executive, board, staff), and directly impacts hospital regulations when it comes to patient safety and providing quality care. The environment is a bit more tricky. It indirectly affects how medical staff, particularly nurses, perform at work. Elements involved include pay, benefits, and promotion. Physiological elements (i.e. stress), the physical work environment, culture, and relationships among co-workers are also vital.

If both factors are taken care of, the instance of readmission and patient safety risk cases are eliminated, or at least reduced. This, in turn, enables the hospital to avoid reduction in reimbursement payments.

Organizational and environmental factors come into play when it comes to preventing the reduction of Medicare payments.

Tine Health

Like various Medicare reimbursement reduction programs, Tine Health aims to improve hospital quality through nurse training. We provide just-in-time-training for high-risk, low-use devices and processes, using smartphones and tablets.

Related Posts
hospital accreditationTop Hospital Quality Problems