Of the 278 hospitals receiving the top 1% penalty for the upcoming year, 85 are independent, not-for-profit facilities, according to a Modern Healthcare analysis of CMS data. Fifty-six are for-profit, while 88 are part of not-for-profit health systems. The remaining 49 are government-owned. They range from tiny facilities such as 11-bed East Carroll Parrish Hospital in Lake Providence, La., to Adventist Health System's Florida Hospital in Orlando, which has 2,083 beds spread across several campuses.
With only 26 acute-care beds, Rockcastle Regional Hospital and Respiratory Care Center, Mount Vernon, Ky., is the smallest of the not-for-profit hospitals that will receive the full penalty under the readmissions program.
And like many small, rural hospitals, Rockcastle's patients are primarily low-income and elderly, said Stephen Estes, the hospital's president and CEO. Such hospitals lack the community support mechanisms, such as church outreach groups and meal assistance programs, that benefit residents in big cities, he said. “We are the hospitals that are least able to effect change and we're being asked to do the most,” he said.
Estes estimated that Rockcastle's readmissions penalty will total about $60,000 for 2013, about 0.75% of the acute-care hospital's annual revenue of $8 million. “That's a professional full-time employee we can't hire,” he said.
Rockcastle, which also has a 93-bed ventilator-assisted nursing facility, has stepped up efforts to lower readmissions with a number of strategies, including home visits by nurse practitioners, Estes said, adding that he's hopeful that such interventions will help keep the hospital out of the penalty range for future years of the program.
“Initially, you can budget for this by offsetting somewhere else, but our worry is that as our disproportionate-share hospital funding goes away, we may not be able to compensate,” Estes said, referring to payment adjustments for hospitals that treat large numbers of poor patients. Those DSH payments will be significantly reduced under the healthcare reform law as its coverage provisions take effect.
Even when hospitals are able to improve, it might not be enough to avoid a penalty because of the way the program is structured, Estes added. The CMS assesses payment cuts using national averages of readmissions for each condition, so the threshold for a penalty is always changing.
“Hospitals are working hard and many of them report having success,” said the AHA's Foster. “But the goals become harder to attain because everyone is chasing them. If everyone reduces their level of readmissions, then the expected level gets smaller year after year.”
Memorial Hospital of Rhode Island, a 159-bed free-standing hospital in Pawtucket, will also receive the maximum penalty under the readmissions program, which will work out to about $147,000, said Marie Kessel, the hospital's vice president of external affairs. Annual revenue is $160 million, she said.
Like many others, Kessel argued that hospitals—particularly safety net facilities—are being unfairly made to bear the brunt of a problem that should be shared across the healthcare continuum. “This process loses sight of patients' circumstances and choices, things that hospitals have a hard time controlling,” she said.
On Sept. 10, Memorial Hospital of Rhode Island announced it had signed a letter of intent to partner with Care New England Health System, a three-hospital system based in Providence, R.I. Kessel said the deal was not driven by concerns about payment cuts and penalties. But if the deal goes through as expected in spring 2013, belonging to a larger system will enable Memorial Hospital to more effectively address overall population health, she said.
The current regulatory environment is overwhelming many community-based hospitals and leaving them with little option but to join a system, said Eddie Marmouget, a partner with BKD National Health Care Group, an accounting and consulting firm based in Springfield, Mo. “Many of them have given up and are looking for bigger partners,” he said. “The big systems see the blood in the water, and they're using this environment to go out and consolidate.”
But plenty of larger systems are also struggling with high readmission rates, according to CMS data. Five of Adventist Health System's 32 hospitals will receive the top penalty, for instance.
Dr. Loran Hauck, Adventist's chief medical officer, said he's optimistic the system can reduce or avoid future penalties. The system is implementing a number of changes, including the use of transition coaches, an approach designed by Dr. Eric Coleman of the University of Colorado, Denver.
And as part of the Partnership for Patients, HHS' $1 billion improvement initiative, Adventist is also working with its Hospital Engagement Network, run by Charlotte, N.C.-based Premier, to lower readmissions.
Still, Hauck said it's difficult to see the effects of new strategies right away because the CMS' readmissions program calculates penalties using three years of past data. “In healthcare, that's ancient history,” he said.
The program's stiff penalties will move the needle on readmissions, Hauck predicted, but he lamented that providers did not successfully tackle the problem already.
“I say shame on us as an industry for not addressing this issue ourselves and for waiting for the federal government to address it through payment restraints,” Hauck said.
The CMS has pushed back against arguments that readmissions are beyond the scope of hospitals' control. In a May 30 letter addressing a provider appeal of a National Quality Forum-endorsed readmissions measure, a CMS official said hospitals can lower the risk of readmissions “through the care they deliver and through their leadership in their communities.”
“Many initiatives around the country have demonstrated that a patient-centered focus on the transition of care from the inpatient to outpatient setting can lead to decreased readmission rates for patients,” wrote Dr. Michael Rapp, director of the quality measurement and health assessment group in the agency's Office of Clinical Standards and Quality.
Yet as the government begins to apply penalties to the first wave of Medicare claims, questions persist about the way the agency calculates the data.
Dr. Ashish Jha, associate professor of health policy and management at the Harvard School of Public Health, Boston, who has published numerous articles about readmissions, said there's no doubt that hospitals could be doing more to improve care coordination and discharge planning. But he argued that the government's current method of measuring readmissions, with its 30-day time frame and lack of adjustment for socioeconomic status, is not a good metric of quality.
“The measure as it's currently structured just doesn't make a lot of clinical sense, and clinicians have a hard time engaging with it,” Jha said. “When they first created the measure, we didn't have the evidence we have now. I think there are modifications that CMS can make, and we'll see if they do. The smartest policies are the ones that are flexible.”