Nestled within the 994 pages of the 21st Century Cures Act that President Barack Obama signed into law on Tuesday is an opportunity for hospitals to change the way they are judged when patients are unnecessarily readmitted.
The law requires Medicare to account for patient backgrounds when it calculates reductions in its payments to hospitals under the Hospital Readmissions Reduction Program.
Until the passage of the Cures Act, originally meant for biomedical innovation but turned into a smorgasbord of healthcare policies, thorny questions about adjusting for patient demographics had been avoided.
Hospitals have been at fault if, within 30 days after discharge, patients return to the hospital for the same reason they were originally admitted. But some hospitals are located in impoverished areas, and many of their patients cannot afford to buy medication or healthy food, or they lack transportation to attend checkups with primary-care doctors.
Nevertheless, unless a hospital's readmission rate falls below the national average, it will face financial penalties under the program.
Hospital and medical groups hope the 21st Century Cures Act will ensure funds are not unduly taken from hospitals that need it most. Policy experts, however, say that the effectiveness of risk adjustment depends on the details of its implementation, which are scant in the legislation.
They have also raised concerns that because sophisticated, reliable risk-adjustment methodologies are in their infancy, handicapping for patient demographics might foster complacency among some hospitals or even exacerbate health disparities, especially along racial lines.
“Nobody wants to give a blanket pass for hospitals to deliver poor care, and we certainly don't want to further disadvantage any already disadvantaged population,” said Melony Sorbero, a senior policy researcher at the RAND Corp.
Created under the 2010 Affordable Care Act, the readmissions program requires Medicare to cut payments to hospitals with excess 30-day readmissions for certain conditions. That list of conditions has expanded from the original three—heart attack, heart failure and pneumonia—to include chronic obstructive pulmonary disease, hip and knee replacements and coronary artery bypass grafts.
The CMS estimated it would save $538 million in fiscal 2017 from payment cuts to 2,588 hospitals under the program. About 3,330 acute-care hospitals and 430 long-term care facilities are eligible. Penalties are capped at 3% of Medicare inpatient prospective payments.
The Cures Act requires the CMS to adjust penalties based on the proportion of a hospital's patients identified as dual-eligible beneficiaries, or those that qualify for both Medicare and Medicaid.
Those patients are often expensive to serve, accounting for nearly a third of total Medicare fee-for-service spending in 2012 despite constituting only 18% of beneficiaries, according to a June report by the Medicare Payment Advisory Commission.
According to Dr. Helen Burstin, chief scientific officer at the National Quality Forum, the risk-adjustment approach may benefit safety-net hospitals the most since it would allow for “apples to apples” comparisons.
Burstin said it might also encourage hospitals to admit the most vulnerable patients, while money saved from reduced penalties could be invested in community initiatives for preventive health.
Even as they praised the gesture contained in the proposed legislation, several experts and hospital leaders questioned the specifics of the risk-adjustment process.
The Cures Act does not contain specifics on how the CMS should adjust for risk. The law states that the HHS secretary “shall assign hospitals to groups” and apply “a methodology in a manner that allows for separate comparison of hospitals within each group.” Those groups would be based on hospitals' overall proportion of dual-eligible individuals.
The secretary “may consider” the Medicare Payment Advisory Commission's June 2013 report, which found that hospitals with higher proportions of poor patients tended to have higher readmission rates and higher Medicare penalties.
The report suggested setting different target readmission rates for different hospitals that would be grouped according to patient profiles, as determined by dual-eligibility.
For instance, hospitals that see 30% of patients who are dual-eligible will not be compared to those who see 2% dual-eligibles, said Philip Alberti, senior director for health equity research and policy for the Association of American Medical Colleges. Beyond that, not much else is clear.
Dr. Michelle Schreiber, senior vice president and chief quality officer at Henry Ford Health System in Detroit believes long-term research will identify the most equitable approach to risk adjustment.
“The variables that will probably need to be included are not only patient-specific but also community-level variables such as how stressed is the community,” Schreiber said. “If you're poor, it increases the risk of readmission, but if you're also poor in a community with poor resources compared to a community with rich resources—that too is different.”
These challenges point to why risk adjustment has not been incorporated until four years into readmission program. Although strong evidence indicates that patient demographics and socio-economic status play a role in health outcomes, researchers have yet to figure out how to reliably predict the effects of different variables.
“These data are difficult to capture,” said Francois de Brantes, executive director of the not-for-profit Health Care Incentives Improvement Initiative. When de Brantes collaborated on research to see whether sorting patients by ZIP codes in New York City could predict patient outcomes, for instance, he and his colleagues came up empty-handed.
But he adds, now that the bill is law, “it kind of forces the industry to come up with a solution.”
Critics of adjusting readmissions penalties based on socio-economic factors say doing so would run the risk of creating a separate, lower standard of care among safety net hospitals serving higher proportions of low-income patients.
The CMS in 2013 explained that it did not adjust risk for socio-economic standards because that would “suggest that hospitals with low SES (socio-economic status) patients are held to different standards for the risk of readmission than hospitals treating higher SES patient populations.”
Safety net hospitals are often found in poor areas, where community resources are limited or nonexistent. Some of those areas also tend to be predominately black or Latino, factors that raise concerns that adjusting readmission penalties could further widen racial disparities in health.
However, some safety net hospitals have proven they can successfully treat patients in underserved communities.
Among safety net hospitals, the most recent penalties incurred under the Hospital Readmissions Reduction Program range from zero to 3%, Modern Healthcare has found.