Medical cost-savings pilot

Twelve New Jersey hospitals have signed up for a three-year pilot project to pay doctors bonuses if they save money on treating patients. The program gets to the heart of health care reform: trying to ferret out cost savings from a system that doesn't want to give them up.

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Medicare pays hospitals a flat fee for patients, whereas hospitals pay doctors by the visit or procedure. This arrangement creates a conflict, where doctors have little reason to be thrifty. Lisa Waters is in charge of the project at the federal Centers for Medicare and Medicaid Services.

Waters: There's really no incentive for the hospitals and physicians to collaborate to improve hospital cost and efficiency.

The pilot project will reward doctors with $100 to $300 for every patient they are able to treat under a certain dollar amount. Sean Hopkins from the New Jersey Hospital Association says this does not mean doctors will withhold necessary procedures.

Hopkins: Clinical decisions are still made by the physicians. … As long as there's no clinical degradation and a physician is comfortable adopting that best practice standard, then there is an opportunity for there to be some savings….Medicare on average only covers about 89 percent of a hospital's actual cost. So hospitals really need some mechanisms to control their cost so they can bridge that gap and better live underneath the payments that the Medicare program provides.

Hopkins says other savings include administrative activities, such as discharging patients in the morning rather than the afternoon, so they don't get stuck staying an extra night. The pilot project lasts for three years.