Healthcare Business News

Severity of readmission punishments doubling for hospitals

By Joe Carlson
Posted: August 5, 2013 - 3:15 pm ET

The number of hospitals facing financial penalties for failing to stop patients from returning to the hospital will remain steady next year, but the potential severity of the punishments is doubling.

The CMS' hospital readmissions reduction program is expected to cut Medicare spending on hospitals by about $227 million during the federal fiscal year starting Oct. 1, according to a 2,225-page final rule published Friday afternoon (PDF).

A federal data analysis shows about 2,200 hospitals will see reductions of up to 2% of their Medicare payments starting Oct. 1 under a program in the Patient Protection and Affordable Care Act that directed the CMS to cut reimbursements to hospitals with high rates of readmissions. The penalties have been up to 1% of Medicare payments for the past year, and are scheduled to top out at 3% beginning in October 2014.

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Medicare officials long have pushed hospitals to cut preventable costs by communicating with patients and doing better discharge planning. But the reform law penalties that went into effect almost a year ago have elevated the issue. “The hospital systems are definitely focused on it,” said J. James Jenkins, Jr., head of the healthcare practice at Nashville law firm Bass Berry & Sims.

Federal officials say a reduction in readmissions that was documented earlier this year was a sign that patients were receiving better-coordinated care.

Critics note that factors like the increasing use of outpatient observation as an alternative to hospital admission may be driving the decline, since observation care does not “count” as a hospital visit in calculating readmissions. Skeptics also note that safety-net hospitals are disproportionately affected by the penalties, because they serve patient populations less likely to follow post-discharge instructions and have higher incidence of chronic conditions.

For 2012 and 2013, the penalties were based on a statistics showing how many patients were readmitted to any Medicare hospital within 30 days following an incidence of three health conditions: pneumonia, heart failure and heart attack. In October 2014, the CMS is adding three more readmissions conditions: chronic obstructive pulmonary disease and arthroplasties of the total hip and total knee, the CMS website says.

A Kaiser Health News analysis found that 1,371 hospitals are receiving a lower fine starting Oct. 1 compared with the current year, and the average hospital fine will be slightly smaller, with the national total $53 million lower. The penalties Oct. 1 will be higher for 1,074 hospitals.

Follow Joe Carlson on Twitter: @MHJCarlson

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