(Story updated at 5:11 p.m. ET)
The CMS released a slew of revisions Tuesday to how it will pay hospitals in its fiscal 2017, which begins in October. Under those changes, thousands of hospitals will see an increase in penalties for 30-day readmissions.
Those penalties would save Medicare an estimated $538 million, or an increase of about $108 million over the previous year, the agency said, even as it projected that its total spending on inpatient hospital services would increase by about $746 million in the coming fiscal year.
Since October 2012, the Hospital Readmissions Reduction Program has required CMS to cut payments to applicable hospitals that see the return of an excessive number of patients within 30 days after discharge for specified conditions.
The CMS estimated that it would penalize 2,588 hospitals for excessive readmission rates for the coming fiscal year. It does so by reducing Medicare payments to hospitals whose readmission ratios exceeded the national average, although it limits those penalties to 3%. The rule applies to about 3,330 acute-care hospitals and 430 long-term acute-care hospitals, the CMS said. Other facilities, like psychiatric hospitals, critical access hospitals and children's hospitals, are excluded.
In announcing the changes, the CMS touted “a commitment to increasingly shift Medicare payments from volume to value.” The administration's goal of linking half of all Medicare payments to quality over quantity by 2018 has also spurred other shifts, such as bundled payments for certain medical procedures, that have fueled discussion and, often, controversy, within the industry over whether and how to adjust for hospitals that serve disproportionate numbers of sicker patients.
“We are disappointed CMS missed another opportunity to adjust for the social and economic challenges of vulnerable patients in its quality improvement and reporting programs,” Beth Feldpush, senior vice president of policy and advocacy at America's Essential Hospitals, an association for safety net hospitals, said in a statement. “The evidence is clear that these programs disproportionately penalize hospitals that serve disadvantaged patients and communities,” she added.
For hospitals that take care of low-income and vulnerable patients, many factors that play into a patient's recovery can fall out of the hospital's control after a patient is discharged, said Mark Fendrick, director of the University of Michigan Center for Value-Based Insurance Design. Poor patients might not be able to afford medications or make necessary lifestyle changes, he said. A heart failure patient who needs to cut back on salt, for instance, will have trouble doing so in a food desert.
“There are special challenges faced by those hospitals that treat large numbers of at-risk patients,” Fendrick said. He suggested that incentives might be applied not merely to hospitals but also to patients, to encourage them to get services they'll need to keep them from returning to the hospital.
Driving the anticipated increase in penalties for fiscal 2017 were changes in how the CMS calculated readmissions for pneumonia, as well as its addition of coronary artery bypass grafts to the list of procedures for which hospitals can be penalized for readmissions within 30 days.
That list already included treatments for heart attacks (in medical lingo, acute myocardial infarction), heart failure, pneumonia, chronic obstructive pulmonary disease (lung disease that hinders breathing) and hip and knee replacements.
For fiscal 2017, penalties are calculated using readmission rates for those six episodes over three years, from July 1, 2012, through June 30, 2015. According to an analysis by Kaiser Health News, 49 hospitals will receive the maximum penalty (3%). The average fine is 0.73%.
The lag between when the data are gathered and when the financial penalty actually hits hospitals is a recurring issue, Fendrick said. Still, a solution to that problem is not imminent. “The data systems are not currently in place for us to be able to make real-time calculations,” he said.
The overall proportion of hospitals penalized for 30-day readmissions, as well as the total amount they are fined, has steadily increased since the CMS launched its program in 2012, continually expanding it from there, the health policy not-for-profit Kaiser Family Foundation has noted.
In the first year, fiscal 2013, 64% of hospitals were penalized, according to the Kaiser Family Foundation. By fiscal 2015, the 78% of hospitals affected had racked up $428 million in total penalties.
The 2,343-page rule in which the changes were laid out also contained changes to numerous quality reporting programs and a payment incentive program to reduce hospital-acquired conditions. It also made changes to the CMS' hospital value-based purchasing program.
The CMS said it would post readmission penalties to its Hospital Compare website as soon as was feasible.
