1. Hader, Richard RN, CHE, CPHQ, NE, BC, PhD, FAAN, Editor-in-Chief

Article Content

Over 15 years ago, the hospital at which I worked endured a 98-day strike from the professional nursing staff because of the issue of implementing a merit pay system. Management argued that they wanted to provide the opportunity for quality nurses to earn more for their outstanding efforts and contributions. The bargaining unit contended that this methodology was a mechanism to stifle nurses' salaries and control costs. Eventually, a performance appraisal tool was developed and implemented that was agreeable to all parties.

Figure. No caption a... - Click to enlarge in new windowFigure. No caption available.

The philosophy behind the introduction of a merit-based salary system is reputable; however, the outcome measure of the system's effectiveness remains in question. Did implementing a merit pay system improve the quality of care provided to the patient? Do nurses work harder to ensure that they receive the highest raise possible? Are performance scores artificially inflated and not truly indicative of performance because nurse managers know that a negative score will result in a monetary loss? And is the focus of the appraisal process on meeting a salary objective rather than a developmental process to improve performance?


The Centers for Medicare and Medicaid Services (CMS) is now proposing an implementation of pay-for-performance reimbursement methodology to hospitals based on a similar rationale as implementing a merit pay system for healthcare workers. Payment restitution will be dependent on the results of process and outcome measures, regardless of the hospital's cost. Administrative, nurse, and physician leaders are adamantly opposed to this payment structure because the definitions of those diagnoses that won't be reimbursable aren't clearly defined or measurable.


For the most part, CMS intends to withhold reimbursement for patients that develop complications while they're in the hospital. Many of these conditions have the chance of occurring regardless of implementing sound evidence-based care practices and principles. Despite the best efforts of the healthcare provider, some patients will develop complications from treatment because of health-related comorbidities, medication reactions, or the development of an exacerbation of a disease process that was dormant and unforeseen at the time of the admission.


The CMS payment mechanism that was intended to control costs might indeed escalate costs. Physicians will be motivated to prescribe additional and expensive diagnostics, medications, or therapies at the time of admission to rule out preexisting conditions. Nurses will need to spend more time documenting, and the patient will suffer from the effects of increased costs and dissatisfaction with the healthcare delivery system.


Before implementing a draconian approach to a payment system that's already fraught with issues, CMS needs to conduct longitudinal evidence-based studies to clearly define the definitions of these nonpayment complications to ensure that hospitals won't be unduly financially burdened. Healthcare leaders need to work collaboratively with CMS to structure and implement a system that's fair, measurable, and objective, or it could further erode the patient's trust in the healthcare system.


Richard Hader