Report suggests slashing Medicare to reward provider quality

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The Institute of Medicine has an idea about how the government should compensate providers for healthcare quality: Congress should cut base payments that Medicare makes to nursing homes, hospitals, insurers and doctors. Then it should use the savings to create pools for pay-for-performance funds.

Hospital providers reacted negatively to the IOM report, which was released this week. The American Hospital Association said cutting already necessary funding would not motivate providers to perform well. Instead, providers need a stable source of funding for quality incentives, the association said.

The IOM report cautioned that pay-for-performance is not a way to save money in Medicare. Rather, it would only help ensure that Medicare funds are used in ways that help patients.