Dual-eligibles: The next target in hospital readmissions penalties

A new proposal from the CMS could address one of the biggest concerns hospital leaders have long had with how readmission penalties are calculated.

Under the proposed rule, issued April 14, the CMS would for the first time consider a hospital's proportion of dual-eligible patients when determining penalties for organizations with relatively high rates of readmissions. Although hailed by industry stakeholders, many said it was an incremental change.

“It's a good way to start,” said Francois de Brantes, director of the Altarum Institute's Center for Payment Innovation. But Medicare has been urged for a long time to examine ways to adjust for social and demographic factors, he added. “The proposed rulemaking still hasn't fully resolved that question.”

The change stems from the 21st Century Cures Act, which was enacted in December 2016. The law required Medicare to take patient background into account when calculating payment reductions under the Hospital Readmission Reduction Program, and to adjust those penalties based on the proportion of patients who were dually eligible for Medicare and Medicaid.

Such patients are disproportionately expensive for hospitals. According to a June report from the Medicare Payment Advisory Commission, they constituted 18% of beneficiaries yet accounted for nearly one-third of total Medicare fee-for-service spending in 2012.

Rather than seek comment on a single method, the CMS proposal presented different options for implementing various aspects of this risk-adjustment strategy, such as the data period used to determine dual-eligibility and the method used to calculate and adjust payments.

For example, it proposed basing the ratio of the dual-eligibles on the total number of Medicare fee-for-service and Medicare Advantage beneficiaries. Using both would be more accurate, the CMS said, particularly in states with high rates of Medicare managed care. But it also included an alternative approach: calculating dual-eligibles using only Medicare fee-for-service stays.

Regardless of how the rules are calculated, Medicare-Medicaid beneficiaries are seen as a relatively consistent group and a clear outlier in terms of costs, de Brantes said.

“These are really, really complex patients,” he said. “This particular category of individuals has a bunch of things going on that is just very different from the general Medicare population, so accounting for those differences makes a certain amount of sense.”

Hospitals and industry groups praised the proposal as a good first step, even as some of them called for more-complex risk adjustment.

The CMS' proposed changes, which would take effect in fiscal 2019 if approved, would help level the playing field for hospitals serving low-income patients, Dr. Bruce Siegel said in a statement. Siegel is CEO of America's Essential Hospitals, an industry group for public hospitals.

“But the rule is only the first step toward true risk adjustment for our patients' social and economic challenges,” he added. “We must go beyond adjusting only payments to adjusting measures so quality comparisons are fair.” He said that America's Essential Hospitals hoped the CMS would “extend this approach to other quality programs, when the evidence for risk adjustment is compelling.”

NYC Health & Hospitals, the city's public hospital system, said that reviewing the changes would take some time. Still, “the principle of grouping hospitals who care for similar patients is an important step in the right direction, especially for safety-net providers like us,” spokesman Robert de Luna said in a statement.

The CMS is also seeking comments on how several of its other quality programs, including the Hospital Value-Based Purchasing Program, Hospital-Acquired Condition Reduction Program and Inpatient Quality Reporting Program, should account for social risk factors. It is accepting comments until June 13.

“You'll have a lot of people criticizing the approach,” de Brantes said. “Those are fine criticisms, but the point is, if you don't start somewhere, you never get any place. At least it puts the issue on the table.”