Let's say you are the head of the Centers for Medicare and Medicaid Services (CMS) in the United States and are trying to answer a simple question: how should CMS incentivize U.S. hospitals? In an ideal world, hospitals that provide superior clinical care while minimizing costs should be optimally rewarded. The problem is, of course, that those two goals - good care for cheap - are often at odds. So we're back to our original question:
How should a government that pays for healthcare (for at least a sub-set of its citizens) incentivize hospitals?
From a cost perspective, it's a fairly simple question. You provide a set payment to a hospital for a set service and allow the free market to work its magic. Hospitals that keep their own costs lower than the government's payment make a profit and hospitals that do not control costs lose money. I'm going to call this the cost reduction handle. By constantly squeezing payment rates for various healthcare services, the government incentivizes hospitals on cost controls.
But what happens if a hospital swings entirely from the cost reduction handle at the expense of clinical quality? Ethical concerns aside, it is not hard to imagine that hospitals who provide inferior care may end up having lower costs and therefore higher profits than hospitals who provide superior care. As a result, the government needs to establish some type of quality improvement handle to incentivize hospitals on clinical quality. If a government can establish a mechanism for continuously monitoring clinical care within hospitals and punishing under-performers, it can incentivize clinical quality.
Here-in lies the rub. Measuring clinical quality is notoriously difficult. What metrics should we use to compare clinical quality in the care of ischemic stroke? Once we have decided which metrics to use, how do we develop the infrastructure to compare outcomes across U.S. hospitals? The systems simply don't yet exist.
In an ideal world, hospitals would be stretched between the cost reduction handle and quality improvement handle so that at no point could they sacrifice clinical care for cost controls or cost controls for clinical care.
