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 who 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 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.
But even as they praised the intent of the provision, several experts and hospital leaders raised questions about how it would work.
In specifying how the CMS should adjust for risk, the Cures Act 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, grouped according to patient profiles.
For instance, hospitals whose patient populations are 30% dual-eligible will not be compared to hospitals where dual-eligibles are just 2% of the patient mix, said Philip Alberti, senior director for health equity research and policy for the Association of American Medical Colleges.
Beyond that, not much is clear.
Dr. Michelle Schreiber, senior vice president and chief quality officer at Henry Ford Health System in Detroit, said it will require long-term research to 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.”
This complexity is one reason the CMS has long been wary of incorporating some form of risk adjustment for socio-economic factors. The agency and the NQF have been studying whether and how to do it.
Although strong evidence indicates that these factors 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.
But now that the bill is law, de Brantes said, “it kind of forces the industry to come up with a solution.”
The CMS has been wary of creating a lower standard of care for hospitals serving higher proportions of low-income patients. In 2013 the agency wrote that making accommodations for economic and demographic factors 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.”
Indeed, some safety net hospitals have proved they can perform as well as any hospital on readmissions. The readmissions penalties that Medicare will impose in 2017 on members of America's Essential Hospitals, a trade group representing safety net providers, run the gamut, according to a Modern Healthcare analysis.
Six of 161 organizations (which operate more than 220 hospitals and campuses) will be penalized between 2% and 3% of their inpatient Medicare pay. But twice as many will see no penalty at all, and many of the AEH members have improved their performance over the course of the program.