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RENEE MONTAGNE, HOST:

While questions about health insurance have gotten all the attention recently, another part of the new healthcare law has been quietly moving forward. That's a push to improve quality of care and cut costs by setting incentives for hospitals to make structural changes. With hospitals now in the second year of making those changes, more are receiving penalties than bonuses under the new initiative.

Jordan Rau of Kaiser Health News joined us to talk about this quality improvement program.

JORDAN RAU, BYLINE: It looks at three areas of hospitals. One area is whether the hospital follows basic clinical guidelines for stuff you're supposed to do, like giving aspirins to heart attack patients. The second is how patients, after they leave, rate the hospital on things like did the doctors and nurses communicate well and was their pain well handled.

And the third, which is new this year, it looks at the death rates of patients for three very common conditions for the elderly set, which are a heart attack, heart failure and pneumonia.

MONTAGNE: So of those hospitals that are getting bonuses and getting penalized, you've been crunching the numbers. What are the big winners and losers, and why?

RAU: It really varies. There's some state where the hospitals are doing exceedingly well and most of them are getting bonuses: Maine, Massachusetts, Nebraska, North Carolina. And these are states that have a lot of smaller hospitals so they tend to be able to get their arms around these measures and improve.

The worst are big states: California, Connecticut, New York, Washington. And these are states, they have a lot of big urban hospitals which tend to do a bit worse on these measures. Which specific hospital got the largest bonus? Arkansas Heart Hospital in Little Rock.

Now, that's a privately owned hospital that just does cardiovascular surgeries and treatments so they can really focus on those. And the biggest penalty was Gallup Indian Medical Center, which is in New Mexico, right on the border of the Navaho reservation. And that's a very busy, government-run facility that deals with a pretty complex health population.

MONTAGNE: Okay. Where does improvement fit in? Do states and hospitals get points for getting better?

RAU: Yes. Everyone gets measured two ways. One is how they compare to everyone else and the second is how much they've improved over two years. Now, the challenge is that if you're a poor hospital, if ou don't have as many resources to throw at some of these areas to get your scores up, and a lot of the times this can be, you know, financially expensive - I mean some of it, like dealing with mortality rates, is extremely complicated. And so one of the things that we're seeing is that some of the really prestigious medical centers that were sort of surprised to get penalties last year have improved pretty dramatically, are now getting bonuses. But some of the safety net hospitals are not doing as well.

Like Denver Health, which the Obama administration has held up as a model for how you handle large swaths of poor people, it's getting a very hefty penalty this year.

MONTAGNE: It does sound, then, like hospitals in states that won't get money from Medicaid expansion may suffer in this because it does seem as if what counts is not just enthusiasm for improving, but the money to do it.

RAU: That's exactly right. And some of these hospitals that handle a lot of Medicaid patients are really getting hit on multiple fronts. They are getting cut on their federal subsidies for handling those patients and they're also losing money from another quality program which punishes hospitals that have too many patients readmitted.

MONTAGNE: Well, just tell me, Jordan, what changes are coming next year?

RAU: It gets even more complicated next year. They're adding more measures, including one that measures efficiency, basically how cost efficient hospitals are in treating patients for Medicare. And then the second thing is that they've got yet another quality program coming in. It's going to punish the hospitals with the most hospital (unintelligible) conditions, you know.

So if you get a staph infection or something in a hospital or you slip and fall, they're going to lose more money. So all together, really, hospitals have got a lot of different judgments coming on them from the federal government, all which translates into more or less money.

MONTAGNE: Well, thank you very much.

RAU: Thank you.

MONTAGNE: Jordan Rau is a senior correspondent with Kaiser Health News.

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