Will Obamacare’s hospital payment cuts harm quality?

A quick response to Sarah Kliff’s post of a few days ago (go read it to catch up):

Though it is true that the ACA would cut payments to hospitals in one large crude way (the productivity updates — see chart here), it also has other incentives (PDF) for hospital quality that were not in place when the program initiated prior hospital payment cuts. Among those is the encouragement of the formation of ACOs, which tie bonuses to quality measures.

I’m not in favor of the meat ax approach embedded in the productivity updates. They run counter to my multi-production function view of the system. But one thing they might do is further encourage ACO formation. To the extent that ACOs can improve quality, we should not expect the same results as found by Wu and Shen, as reported by Kliff (and me!!!).

Now, ACOs have limitations, about which I’ve blogged considerably and express again in a forthcoming publication. I’m not terribly optimistic they will address the system-wide health care quality and cost problems, even if they prove to be a useful tool for Medicare cost control. All I’m saying is there are some reasons to be cautious about extrapolating the findings of Wu and Shen. This isn’t 1997.


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