Penalties For High Readmission Rates

As lawmakers consider ways to pay for health reform, use our glossary of potential offsets to get caught up fast.

By Jason Plautz

Updated: January 2, 2011 | 10:24 p.m.
July 21, 2009

Glossary Of Offsets Efficiencies • Public Option • Health IT • Comparative Effectiveness • Medical Homes • Medicare Cost Sharing Taxes • Taxes For Noncompliance • Surtax On The Wealthy • International Tax Changes • Sugary Beverage And Alcohol Tax • Tax On Insurance Companies • Plastic Surgery Tax • Changing Tax Exclusion For Employment-Based Health Insurance Quality Of Care • Measuring Quality Of Care • Preventive Service • Expanding Disease-Management Services Provider Payment Revisions • Pay For Performance • Abolishing The SGR • Bundling • Reduce The Annual Update Factor • Partial Capitation • Penalties For High Readmission • Cut Payments To Medicare Advantage TOPIC PAGE: Health Care

Updated at 3:30 p.m. on Nov. 24 to reflect continuing legislation.

Definition

In order to encourage efficient, complete care on a patient's initial visit, penalties would be levied on hospitals that report higher-than-expected readmission rates.

Executive Summary

An April 2009 study in the New England Journal of Medicine looked at rehospitalizations among Medicare patients. The results were staggering: Almost 20 percent of patients were readmitted within 30 days, and 34 percent were back in the hospital within three months. The estimated total cost to Medicare: $17.4 billion.

A 2007 MedPAC analysis found that 13 percent of readmissions were easily preventable with steps like follow-up phone calls, better medication instructions or providing scales and blood pressure cuffs. But hospitals aren't paid for these measures, and they get paid equally for services even after a patient's first stay.

Don May, vice president for policy at the American Hospital Association, said controlling readmissions is a tricky business, making a fair penalty system difficult.

"Preventing readmissions involves hospitals, doctors, post-acute care as well as the patient and their family," May said. "We believe that there are certain readmissions that are avoidable and that we can have an influence on. But it won't help better coordinated care to just cut payment on those readmissions that are planned or unavoidable. It's hard to apply that policy."

In addition to a bundled payment system to cut down on readmissions, penalties for readmissions are also being considered. The Congressional Budget Office option would begin with the public disclosure of acute care readmissions. Starting in 2011, the Centers for Medicare and Medicaid Services would issue an analysis of hospital readmission rates, identifying diagnoses and areas where readmission would be preventable. On its Hospital Compare Web site, CMS has already begun listing readmission rates for patients with heart failure, pneumonia and AMI.

The following year, hospitals with higher readmission rates than expected under the CMS analysis could potentially have funds withheld. Expected readmission rates would be kept steady each year to give hospitals a fixed target, although readjustment is a possibility.

Not only is the plan expected to motivate hospitals and primary care providers to give a complete initial treatment, but it also could cut down repeated tests by improving coordination between hospitals, patients and post-acute care facilities.

Opponents say that identifying a preventable readmission is difficult and subjective, and would create red tape that bogs down Medicare administrators. Other performance-based penalties have been discussed for providers who do not meet quality standards or payment benchmarks, but the same concerns remain about ensuring that penalties only affect the hospitals that are inefficient. Still, May said that with the right guidelines in place, penalties could help improve the quality of care.

"If you're stinting on care, the patient is going to be readmitted," May said. "What we need to do is make sure we're tying quality outcome measurement to that."

Max Savings

In its December 2008 report, the CBO estimated that reducing payments to hospitals with readmission rates above the 75th percentile would save $2.5 billion by 2014 and $8.1 billion by 2019.

Most Compatible With

This plan would work especially well with a bundled payment system that reduces costs on initial visits, forcing hospitals to find efficient and effective treatment methods.

Plans

Both the House and Senate bills call for a program starting in 2011 that would reduce base payments to hospitals if they fail to meet certain benchmarks on readmission rates.

Links

• New England Journal of Medicine study on readmissions

• 2007 MedPAC analysis of readmissions

• CMS' Hospital Compare site

• 2008 CBO Budget Options for Health Care (reducing payments for high readmission rates is option 31)

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