Health Reform Memorandum

Dear (insert name of congressman here),

As you certainly know by now, the Affordable Care Act (ACA) was signed into law in 2010.  After withstanding a number of challenges, including a state-led challenge in the Supreme Court and the contentious 2012 election, stakeholders are actively implementing the law.   Indeed, although the law will eventually touch nearly every aspect of how health care is delivered in this country, this memo will only touch on one of those issues: the promotion of quality metrics in Medicare populations. Although, at first glance, this issue may seem to be the most intuitive and the least contentious of a raft of issues, this memo will use the issue as a proxy to show that the law may lead to many unintended consequences.

Almost all health care professionals and health care consumers agree that quality is an important metric in health care delivery, and that is should be improved.  Although the United States has one of the most (if not the most) advanced health care system in the world, a number of troublesome issues have emerged and not been resolved over time. One of those issues is medical errors: The Institute of Medicine estimates that nearly 60,000 medical errors are made a year.  Not only do medical errors cause further harm and, in some cases, death to already sick patients, but perhaps more importantly: the wide spread prevalence of medical errors also erodes patient trust in the medical community. Another important is the inducing of patient demand through prescribing unnecessary diagnostic tests or appointments;. Due to the fee-for-service nature of medicine in America, this phenomenon is also widespread.  The IOM estimates that nearly $250 million spent annually might not have any practical medical use for patients. The reverse side of this phenomenon is: patients also might not receive appropriate coordination in care if it is deemed to expensive or unnecessary by involved hospitals.

With these important issues still in need of addressing, the “quality” of health care has emerged as a key analytical concept to help operationalize many of the issues listed above.  Indeed, while the ACA did not overtly aim to control health care costs, one could argue it did include stipulations to increase access and improve quality in health care.

Before examining how the ACA aims to improve quality, however, a quick look at definitional issues related to the concept is necessary.  There are two issues: 1) how to define quality; 2) what measures best operationalize the concept of quality?  As the discussion above alludes to, quality in the health care sector is tied to outcomes: those outcomes may be good, or those outcomes may be good.  Quality, however, for better or worse is a function of outcomes rather than health professional effort or other metrics.

Since quality is primarily operationalized through the prism of outcomes, the US congress identified several outcomes in the ACA that should be optimized. (Re) hospitalizations is one the main quality outcomes outlined in the law. Under Medicare’s Inpatient Prospective Payment System, if an acute hospital experiences “excessive readmissions” over a 30-day time period.  Another important element of the law will tether Medicare reimbursements to patient satisfaction scores.  On the face of it, these quality measures seem to be a positive step in the right direction.  Rehospitalizations are deemed a negative quality outcome because they may signify that a hospital did not properly address a patient’s underlying condition.  Furthermore, the rehospitalization will further add to medical costs: Not only must the patient stay in the hospital for another period of time, but the underlying medical condition may have worsened after discharge. A similar logic applies to the use of patient satisfaction scores: Although clinical outcomes might be able to capture a portion of the work done by doctors, with the rise of the “medical consumer”, the attitude of doctors and nurses is just as important.

There is a certain logic behind these measures; however, paradoxically they might not be the best ones to promote quality. As Dr. Asish Jha has pointed out, the rehospitalization metric will likely cause hospitals to focus on certain medical conditions disproportionately (pneumonia and heart failure) at the expense of others that equally important to quality outcomes.  Jha also argues that by focusing on single metrics rather than broader measures, hospitals will be incentivized to cut corners on quality management programs that may actually lead to the perverse result of having an improvement in 30-day rehospitalizations, but an overall decline in hospital quality.  Measures of consumer satisfaction may also provide the wrong incentives: Studies have shown that patients’ satisfaction scores are largely bimodal: for patients who are sick, either terminally or have experienced an acute accident, the scores are quite low; for hospitals that provide numerous luxury amenities (unrelated to patient care) the scores tend to be high.  At the end of the day, neither of the scores may be measuring quality metrics that actually improve the quality of care given.

The issue of quality in health care is an important one. With the imminent implementation of the ACA starting in 2014, a range of quality metrics will be used to determine the reimbursement rate to hospitals that treat Medicare beneficiaries.  Just as in other areas of health care, however, one should be careful of easy answers to complex questions: The quality problem in US health care has emerged as the result of complex forces over the past 50, may be even 100 years.  Basing reimbursement levels on one flawed metric such as rehospitalizations and customer satisfaction, although it may be well intentioned, may actually have the unintended consequence of holding quality initiatives back in the very hospitals they were meant to improve.


HHS. (2012). Affordable Care Act Text.

IOM. (2001).  Crossing the Quality Chasm.  Available at: