Penalty program to reduce hospital inpatient readmissions could present an opportunity for pathologists and clinical laboratories

Remember the Medicare program that was designed to target hospital inpatient readmissions? The bill is coming due and Medicare penalties are soon to hit 2,211 of the nation’s hospitals. According to Kaiser Health News, as much as $280 million in penalties will be assessed against hospitals that did meet their goals.

The maximum penalty is 1% of a hospital’s base Medicare reimbursement. At least 278 hospitals will pay this maximum penalty, including some nationally-prominent institutions.

One consequence of these payment forfeitures is that hospital administration and physicians will be looking for ways to improve care and reduce the readmission rate for Medicare patients. In turn, it can be expected that clinicians will be motivated to pay closer attention to clinical laboratory test results in determining appropriate therapies and making discharge decisions. Utilization of medical laboratory tests may also improve as part of these overall efforts to improve patient outcomes and lower the rate of readmissions.

It is the 2010 Affordable Care Act that authorized these penalties as part of a Medicare effort to force improvements in hospital quality.

It’s called the Medicare Readmissions Reduction Program and it was authorized as part of the Accountable Care Act of 2010 (ACA). The graphic above shows how participating hospitals fared during the first year of this program. Hospitals will forfeit a total of $280 million in Medicare payments, beginning in October. (Graphic by Kaiser Health News.)

It’s called the Medicare Readmissions Reduction Program and it was authorized as part of the Accountable Care Act of 2010 (ACA). The graphic above shows how participating hospitals fared during the first year of this program. Hospitals will forfeit a total of $280 million in Medicare payments, beginning in October. (Graphic by Kaiser Health News.)

Readmissions cost Medicare a bundle. According to a story published in The Bangor Daily News, in 2008, payments for inpatient care accounted for 29% of total Medicare payments for that year. A story published in Kaiser Health News reported that nearly 2 million Medicare beneficiaries are readmitted within 30 days of release each year. This costs Medicare an additional $17.5 billion in hospital bills, the KHN reporter wrote.

Looming Penalties Have Captured the Attention of Hospital Executives

Now Medicare will penalize about two-thirds of the 3,367 hospitals whose readmission rates it evaluated, a story published in Dayton Daily News reported.

“I’m not sure penalties alone are going to move the needle,” observed Eric Coleman, M.D., M.P.H., Professor of Medicine and Head of the Division of Health Care Policy and Research at the University of Colorado School of Medicine. “[B]ut they have raised awareness and moved many hospitals to action.” Coleman is a national expert on readmissions.

The Medicare officials consider readmissions a prime indication of an overly expensive and uncoordinated health system, the KHN story stated. Nearly 20% of Medicare patients return to the hospital within a month of discharge. Further, under the traditional fee-for-service reimbursement model, providers actually benefit financially when patients return to the hospital for additional treatment.

Under the Readmissions Reduction Program (RRP), a total of 278 hospitals across the nation will forfeit at the maximum rate of 1% of their base Medicare reimbursements, KHN reported. The penalties grow stiffer because, beginning in October 2013, the maximum penalty will increase to 2% of regular payments. Next, in 2014, the penalty jumps to 3%.

Readmissions Cause and Effect Can Be Hard to Pinpoint

Not everyone is happy with the RRP. ”A lot of places have put in a lot of work and not seen improvement,” stated Kenneth F. Sands, M.D., Senior Vice President for Quality at Beth Israel Deaconess Medical Center and Associate Professor of Medicine at Harvard Medical School, in the Kaiser News  piece. “It is not completely understood what goes into an institution having a high readmission rate and what goes into improving it.”

Beth Israel is among several nationally-known hospitals to be penalized for excessive readmissions. This is in spite of the fact that it has unusually low mortality rates for its patients.

It is a similar story at Boston’s prestigious Massachusetts General Hospital, which was ranked the number one hospital in the nation by U.S. News & World Report. “[Readmissions] is a big focus of ours right now,” stated Sally Mason Boemer, Senior Vice President of Finance at Mass General.

More Hospitals That Serve Poorer Populations Are on the Penalties List

Hospitals that provide a significant level of care to low-income, uninsured, and vulnerable populations may be hit disproportionately by the penalties. Kaiser Health News’ analysis indicated that 76% of safety net hospitals will lose Medicare funds in the fiscal year beginning in October. This compares with only 55% of hospitals that treat few disadvantaged patients

“It’s a tough group to prevent readmissions with,” observed Michael H. Baumann, M.D., M.S., F.C.C.P., Chief Quality Officer at the University of Mississippi Medical Center (UMMC) in Jackson, Mississippi. UMMC, whose patients include those of low socioeconomic status, did not have excessive readmission rates, thus is not subject to the penalties. Baumann explained that UMMC doctors had made headway against some readmissions by calling patients at home following discharge. “It’s a fairly simple approach, but it’s very labor intensive,” he noted in KHN.

For its part, Medicare pointed out that many safety-net providers and teaching hospitals do as well or better on the measures than non-safety net hospitals, according to KHN.

Bill Kramer, M.B.A., Executive Director for National Health Policy with the Pacific Business Group on Health, a California-based coalition of employers, summed up the view of some proponents of the RRP. “[The penalties provide] an appropriate financial incentive for hospitals to do the right thing in terms of preventing avoidable readmissions,” he stated in the KHN story.

Pathologists and clinical laboratory managers will want to take note: hospital labs that offer enriched clinical support at the time of test order (pre-pre-analytical) and when the physician gets the lab results (post-post-analytical) will have opportunity to deliver greater value to clinicians, while contributing to improved patient outcomes.

—Pamela Scherer McLeod

Related Information:

Medicare To Penalize 2,211 Hospitals For Excess Readmissions

Readmissions Reduction Program

Hospital Readmission Reduction: Evidence-Based Steps to Reduce Hospital Readmissions

Preventing Hospital Readmissions: The First Test Case for Continuity of Care

More than 2,200 hospitals face penalties under ObamaCare rules

Hospitals’ Medicare funding cut over readmissions

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