Medicare Readmission Penalties – Effects and Management

by | Published on Sep 22, 2014 | Healthcare News

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According to the federal government, one in five elderly patients is readmitted to a hospital within 30 days after leaving that hospital. Though many of those readmissions are unavoidable owing to the unexpected change in the patient’s condition or a planned follow-up treatment, too many re-admissions are simply the outcome of patients’ confusion over new drugs, insufficient follow-up visits to primary care physicians or the inability of a family to deal with home care. As per the Medicare Payment Advisory Commission, 12 percent of Medicare patients are estimated to be readmitted for several inconspicuous reasons and Medicare could save $1 billion by avoiding even one in every 10 such readmissions. Medicare’s Hospital Readmission Reduction Program (HRRP) that penalizes unnecessary readmissions to hospitals was introduced to achieve this objective. However, in practice several hospitals struggle to maintain their revenues under this rule. Let’s take a closer look at the effects and management of Medicare readmission penalties.

Readmission Reduction Program – An Overview

The Affordable Care Act (ACA) of 2010 insisted that the Department of Health and Human Services (HHS) set up a readmission reduction program which became effective on October 1, 2012.  The program was intended to provide incentives for hospitals that implement strategies to reduce the number of costly as well as unnecessary hospital readmissions. According to the Centers for Medicare and Medicaid Services (CMS), a readmission is defined as getting admitted to a subsection hospital within 30 days after discharging from the same or another subsection hospital. Subsection hospitals include short term inpatient acute care hospitals excluding critical access, long term care, psychiatric, rehabilitation, cancer and children’s hospitals. The main objective of this program is to enhance quality care and at the same time lower costs for Medicare patients. This is also meant to help to ensure that hospitals are discharging patients once they are fully prepared and safe to receive continued care at home or a lower acuity setting.

The initial hospital inpatient admission for Acute Myocardial Infarction (AMI), Congestive Heart Failure (CHF) or Pneumonia is regarded as the ‘index’ admission. Readmission penalty will be taken against the hospital if it admits ‘index’ patient for the same cause as index admission or a different cause within 30 days of discharge from the index admission. Two exceptions are given for the readmission penalty though, such as:

  • Readmitting for certain staged AMI procedures possibly planned during the ‘index’ admission
  • Hospital inpatient readmissions to the same hospital for the same conditions on the same day

The above factors have to be taken into account when it comes to performing hospital billing and related tasks.

Impact of Penalties on Hospitals

According to the 2013 CMS data, 2,225 hospitals spanning across 49 states were to pay readmission penalties under HRRP. Another 2013 study published in the Journal of the American Medical Association (JAMA) found 2189 hospitals (66.7%) from 3282 hospitals received penalty under HRRP while large (40%), academic (44%) and safety net hospitals (44%) were more likely to be highly penalized than small, non-academic and non-safety net hospitals. As Emergency Department (ED) is the entry point for most of these readmissions, the hospitals should make sure that the emergency room staff and physicians can identify the patients coming to ED for any cause that holds a reasonable probability for inpatient admission within 30 days after the discharge from the same hospital, if the first admission was for AMI, CHF, or pneumonia. In order to avoid penalties, hospitals are taking several measures to reduce readmissions such as:

  • Improving co-ordination with other providers and care settings to make sure that the discharged patients can get the care they require for a safe transition from the hospital.
  • Employing registered nurses, case managers and discharge planners to see high risk patients, identify their needs and ensure there is plan for meeting all the needs and provide education prior to the discharge.
  • Once the patient is discharged, hospitals tend to co-ordinate with community resources such as physicians, home health agencies and more. Certain hospitals call their patients hours after the discharge and make sure that they have understood their plan for continued care, have access to medications and other resources, and alleviate patients’ concerns.
  • Establishing policies and procedures that notify physicians regarding a patient’s discharge, following-up on test results and checking on patients’ progress.

The American Hospital Association (AHA) says that there are wide variations in how much control hospitals have in influencing the readmission rates. Certain hospitals are being unfairly penalized if they are located in areas that have fewer physicians and other community-based health services. However, it seems that the penalty programs have been fruitful as a significant reduction was found in the 30-day readmission rate for Medicare. As per CMS, the readmission rate was around 19% during 2007-2011. This rate plummeted to 18.5% in 2012. The latest data shows the average 30-day readmission over the first 8 months of 2014 is less than 18%, which is equivalent to 130,000 fewer readmissions.

A Kaiser Health News report highlights the mixed response received for the incentive program given to the hospitals. Many hospitals find it difficult to receive the incentives despite introducing readmission reduction strategies. According to the report, Medicare not only looked at how hospitals scored in comparison with each other to assess quality, but also analyzed how much each hospital improved from the past two years compared to others. The report estimates only 729 hospitals to see an increase in payments with the combined readmissions and value-based programs.

Looking Forward to 2014 and Beyond

In FY 2015 IPPS Proposed Rule, CMS proposed to include two additional readmissions measures, acute exacerbation of chronic obstructive pulmonary diseases and elective total hip or knee arthroplasty for the calculation of readmissions payment adjustment factor in addition to AMI, CHF and Pneumonia. However, the lawmakers had recommended adding coronary artery bypass graft (CABG) surgery, percutaneous coronary intervention (PCI), and other vascular conditions into the program as well.

However, the most important development is the bill that eases readmission penalties on low-income hospitals. On June 19, 2014, a bipartisan group of senators introduced a legislation that makes Medicare to take account of the financial status of a hospital before deciding whether to impose penalty for too many readmissions. The main objective of this bill is to address one of the major complaints regarding the HRRP that hospitals that provide services to mostly low-income patients are more likely to be penalized. Though Medicare adjusts for different sickness levels of patients across hospitals, the ACA does not insist regulators to take socio-economic status into account.

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