In a broad attempt to improve the quality of health care in the U.S., the federal government has enacted a variety of carrot-and-stick incentives to push hospitals in the right direction. But are those programs having the right impact?

For the past two months, Tyler Arnold has interned with the performance improvement team at the Essential Hospitals Institute. During this time, he has taken a keen interest in learning how essential hospitals strive to provide quality, patient-centered care while facing external financial pressures.

By highlighting a recent Health Affairs article and the work America’s Essential Hospitals engages on various fronts, Tyler shows us some of the challenges that lay ahead for our members:

Federal incentive programs are designed to reduce hospital-acquired harm, reduce unnecessary readmissions, improve coordinated care through electronic health records (EHRs), and ultimately improve the patient experience. If hospitals succeed, they would receive higher Medicare reimbursements as a reward. If they fail (or are slower at improving than their peers) they are penalized by losing a chunk of their Medicare payments or miss out on supplemental money.

Unfortunately, these incentives may be unjustly applied to hospitals facing the unique challenges of serving the most vulnerable. Many essential hospitals do not have the resources to invest in more staff, new electronic health record systems, or supplemental safety training.

Even if they do invest in such expensive programs, the expected improvements in patient experience may not materialize due to factors beyond the hospital’s control.  Low health literacy, limited English proficiency, and access to healthy groceries and safe neighborhood parks to exercise in are all factors that impact wellbeing in the populations served by essential hospitals.

This problem is illustrated in a study published this month in Health Affairs. The study compared California safety net and non-safety net hospitals on cost efficiency, processes of care, mortality, penalties under Value Based Purchasing (VBP) and the Hospital Readmissions Reduction Program (HRRP), and incentives under EHR meaningful use.

It turned out that the study’s safety-net hospitals, as identified by Medicare disproportionate-share hospital (DSH) patient percentages, had an insignificant difference in cost efficiency ($7,688 vs $7,973; p=0.14), but had a significantly better mortality rate index (0.91 vs 1.02; p <0.001).

Even though they had favorable mortality rates, these safety net hospitals were far more likely to be penalized under VBP and HRRP and not receive incentives for EHR meaningful use, because they do not have high scores, for example, on patient experience and process of care measures.

What, if anything, should be done to account for the unique challenges faced by essential hospitals in boosting the quality of their care?

America’s Essential Hospitals is taking a variety of steps to support its members who care for the most vulnerable and these are just few:

  • It strongly supports Sen. Joe Manchin’s readmissions bill, which would incorporate socioeconomic status into the Hospital Readmissions Reduction Program moving forward.
  • It has successfully advocated for delays in cuts to Medicaid DSH payments – the disproportionate share payments which are crucial to helping hospitals maintain their commitment to provide essential services like trauma and burn care.
  • It collects and publishes a Vital Data report, highlighting the unique characteristics of member hospitals to illustrate the important role they play in their community.
  • It has the Essential Hospitals Engagement Network (EHEN), which works to reduce hospital-acquired harm and readmissions.

All hospitals, regardless of the socioeconomic status of their patients, should pursue higher quality care – and it’s good for the government to incentivize that. Those incentives, however, need to account for the challenges faced by essential hospitals and balance valuing process of care with health outcomes. Granted, it is easier said than done.


Tyler Arnold is currently a senior at George Washington University completing a Bachelor of Science in Public Health.