News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel

News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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One approach is to bundle payments to hospitals, physicians, labs, and other providers

Momentum is building around a new effort to drive down existing rates of hospital readmissions. Different reimbursement proposals to encourage hospitals and physicians to reduce current readmission rates will likely also change the reimbursement status quo for laboratory testing. For example, bundling Part A and Part B payments may be one approach.

Experts increasingly believe one game changer in lowering healthcare costs and improving outcomes is avoidable hospital readmissions. One in five Medicare patients returns to the hospital within 30 days. Overall, readmissions cost Medicare an estimated $17 billion yearly. Of this total, about $12 billion are believed to be avoidable cases

The main reason for avoidable readmissions is lack of follow-up care. For example, in one post-discharge survey 64% of patients said no one from the hospital even talked with them about managing their care at home!

Follow-up rates are so low for a simple reason: hospitals aren’t paid to coordinate care after a patient leaves. In fact, providers get a better payday when the patient returns to the hospital for more care, because insurers only pay for treating patients, not for keeping them healthy and at home.

There are hospitals with successful follow-up care programs—but these programs operate at a loss. An article in the New York Times noted that a follow-up care program for heart failure patients implemented by Park Nicollet Health Services, a hospital and clinic system in St. Louis Park, Minnesota, cut readmissions from one in six to one in 25.

While the program saved Medicare $5 million per year, it cost Park Nicollet $750,000 to operate. Park Nicollet earned a $247,000 bonus from Medicare last year, but that’s only about one-third of the actual cost for follow-up.

Catholic Healthcare Partners in Cincinnati also developed a successful follow-up program with federal grants from 2002 to 2006.  The system’s CEO Michael D. Connelly told the New York Times that the program was discontinued because payers couldn’t be convinced to pay for it.


The Medicare Payment Advisory Commission has proposed reducing rates for providers with the highest readmission rates. Leaders of the Senate Finance Committee, Max Baucus (D-Montana) and Charles E. Grassley (R-Iowa), whom may have the last world on healthcare reform, recently announced support in their plan for financially rewarding hospitals, rather than punishing them, for reducing the number of patients requiring readmission.

The incentive may include bundling payments, in which Part A and Part B providers receive a single, global payment for all services provided during a patient’s hospital stay. The idea is this would drive collaborative innovations to increase everyone’s share of profits, thereby resulting in lower costs, better coordination of care and higher-quality outcomes.

The Centers for Medicare and Medicaid Services (CMS) in April launched a new pilot, the Care Transitions Project, to smooth the transition from hospital to community. The program involves 14 Medicare quality improvement organizations across the country working with Medicare to implement quality improvement initiatives to reduce readmissions.

The agency in July also launched a Hospital Compare website that rates hospitals according to readmissions rates as: “no different than the U.S. national rate,” “better than the U.S. national rate” or “worse than the U.S. national rate.” This effort is supported by the Hospital Quality Alliance, a Washington, DC-based of government and consumer and industry stakeholders.

For clinical laboratories, an arrangement that bundles Part A and Part B reimbursement into a single payment to be split among the hospital, physicians, and other providers would represent an important change. The precedent is that bundled payment (think DRGs for Part A services since 1983) have under-reimbursed for the laboratory test contribution to the patient’s overall care.

For that reason, clinical lab managers and pathologists will want to keep a watchful eye on reimbursement proposals designed to encourage providers to prevent avoidable hospital readmissions.

Related Information:

Medicare releases data on “preventable” hospital readmissions

Hospitals Pay for Cutting Costly Readmissions

Medicare Targets Avoidable Hospital Readmissions to Jumpstart Delivery Reform

CMS Readmissions Pilot Could Be a Sleeper Hit

Medicare Test-Drives a Single-Payment System in Four States

New Web Site Helps Patients Shop for Hospital Care Based On Quality and Price CMS Web Site Features Updated and More Robust Information to Help Consumers with Their Health Care Choices