Readmission Penalties: Why Some Hospitals Don’t Care

Hospital Readmissions Reduction Program data showed 2,583 US hospitals will see cuts in their Medicare reimbursements due to the number of patients readmitted within a month. The CMS estimated the reductions in this round of penalties would total $563 million for hospitals over a year, but only 56 hospitals were assessed the maximum reduction of 3 percent.

 “A lot of hard work has gone into trying to reduce readmissions, and the needle has not moved very far,” said Dr. Karen J. Maddox, co-director of the Center for Health Economics and Policy at Washington University in St. Louis, who has been skeptical of the initiative. “It’s been a huge investment by hospitals but not very much in outcomes, but some good things have come out of it.”

This huge investment includes a case management system to identify and track at risk patients for a month or longer.  Additionally, this means employing skilled clinical nurses scouring the hospital nursing stations for the medical records of patients with a complicated diagnosis or risk status who often end up back in the hospital a few weeks later.  Furthermore, once a high-risk patient is identified, this expensive staff usually connects with the patient in hospital identifying their  home resources, transportation needs, family support, and primary care doctor along with a unique and indefinable list of other elements that make up that person’s care after they leave hospital.

Although probably never spoken about in public circles, some very bright and astute chief financial officers have done the methodical calculation figuring out that it is cheaper not to spend a lot of effort preventing readmissions.  In other words the loss of readmission revenue plus the expense of prevention is more than the loss of the penalty.  The pragmatic answer is clear–don’t worry about the readmission penalties. The Kaiser Health News analysis noted that there will be a 0.71 percent decrease in payment for each Medicare patient who leaves the hospital next year.

Before you raise your hands in moral desperation there may be a way to resolve the dilemma by placing the readmission responsibility in the hands of those providers who should have been engaged in the first place.  While initially it might have seemed logical to make hospitals responsible for readmissions, keep in mind the fact that hospitals, per se, do not admit patients to the facility.  Doctors admit patients to hospitals and are primarily responsible for their care while they are in the hospital.  Hospitals provide nursing care, technology, surgical facilities, and hotel services to patients while they are in the facility, but doctors provide and guide the care with medical and surgical services.

The community based Accountable Care Organization (ACO) should be where patient care is monitored and managed to prevent readmissions.  After all, under the new Pathways to Success program, the ACO is becoming financially responsible for medical outcomes at all levels.  Furthermore, the ACO and their community patients are the new “center of the healthcare universe” and hospitals assume the new role of a cost center.  On the other hand, hospitals and their collection of specialist physicians and surgeons still need to have a role in the transition of care from hospital to the home and the outpatient setting.  ACOs have the analytical infrastructure in place and the fundamental responsibility to identify and track patients in transition from hospital to specialized nursing facilities or home.  This is population management.

CMS and the federal government seem to suffer from the “punitive-punishment syndrome.  It seems as if many behavioral changes are led by punishment rather than incentives.  The CMS hospital DRGs are paid at marginal rates allowing little flexibility.  If we believe that readmissions are a medically and socially a bad thing, and we want to change the process then we should pay hospitals a tiered DRG to engage them fully in the process.  Alternatively, having physicians take the lead within the context of the ACO is consistent with current practical healthcare thinking.  Eventually the ACO and its physicians should be paid a single, fair, and reasonable amount to cover all the management elements of care for the Medicare patient.

Craigan Gray

About the Author

Craigan Gray, MD, MBA, JD

Dr. Craigan Gray, Salient Healthcare’s Chief Medical Officer, brings rich experience from private practice, hospital leadership, and governmental health-benefit programs. Prior to joining Salient, Dr. Gray was director of North Carolina’s $12 billion Medicaid program. His time as VPMA at Bon Secours Our Lady of Bellefonte Hospital in Kentucky was distinguished by moving the facility into the top-quality performance tier for Health Grades and CMS health quality indicators. Dr. Gray is a Stanford University trained Obstetrician/Gynecologist. In addition to an MD degree, Dr. Gray holds an MBA degree and a JD degree. He is a Certified Physician Executive and is published in various medical journals.

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