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One aspect of the pay-for-performance movement in healthcare has hospitals across the country scrutinizing their readmission rates. With the passage of the Patient Protection and Affordable Care Act last year, Congress gave the Centers for Medicare and Medicaid Services the authority to penalize hospitals for excessive readmission rates.
As we write, CMS has not released final rules related to this initiative, but a common interpretation of PPACA is that CMS will be able to withhold a percentage of all inpatient Medicare payments when a hospital repeatedly re-admits within 30 days of discharge. Initially, CMS monitoring of readmission rates will focus on heart failure, acute myocardial infarction, and pneumonia cases.
And the clock starts ticking sooner than many think. Although the law will not take effect until 2013, readmission rate monitoring will begin this year. Specifically, PPACA allows CMS to withhold up to 1 percent of Medicare payments for hospitals with high readmission rates during federal fiscal year 2012, which begins in October 2011.
The penalty rises to up to 2 percent of payments in 2014 and up to 3 percent in 2015 and thereafter. These payments will be calculated based on a hospital's aggregate Medicare payments for all discharges, not just for the specific conditions being monitored.
Impact to hospital bottom lines
To estimate the penalty an individual hospital could face, one must determine the amount of excessive payments made for each applicable condition. (It's estimated that CMS spends over $15 billion a year on readmissions, of which $12 billion is related to preventable cases.)
The law calculates excessive payments based on the number of patients with the applicable condition, the base payment made for those patients and the percentage of readmissions above the expected level.
Take, for example, a hospital that treated 250 heart failure patients and had an average reimbursement rate of $5,000 and a readmission rate 20 percent higher than expected. Its excessive payments for heart failure would be $250,000. Add this to the excessive payments for the other conditions and the total penalties can grow quickly. If private insurers follow CMS' lead, hospitals that fail to manage readmissions will face major cash shortfalls.
Best practices for readmission performance improvement
There are steps that hospital administrators can take now to systematically identify readmission trigger points, measure their frequency and reduce their occurrence. In our 25 years helping hospitals manage the cost and quality of healthcare, we have identified these key steps to effectively reducing readmissions:
· Monitor Outcomes Against Risk-Adjusted Expected Values: The path to improved performance begins by knowing where you stand. This is done by comparing hospital performance with risk-adjusted models to project expected readmissions for a given period of time. With this projection, hospitals can forecast the potential impact of the new law and target areas for improvement.
· Focus on Post-Discharge Care Coordination: Whether a patient returns to the hospital is determined by factors beyond the care he or she received during the original stay, including adherence to discharge instructions, the quality of care in the setting to which he or she was discharged, and other outpatient treatment. A multi-disciplinary team must be used to address these disparate touch points.
· Adopt Best Practices: With the growing body of literature on best practices, hospitals can ensure that their care meets and exceeds that of the best performing hospitals nationally. Areas of improvement for readmissions are most typically focused on better care during hospitalization, improved communication among providers, holistic care planning that starts at the point of admission, clear discharge instructions, discharge to proper care setting, timely physician follow-up visits and appropriate use of palliative care.
Cost and quality hand-in-hand
Hospital readmission rates have long been a concern for clinicians, administrators, payers and patients. With healthcare reform legislation signed into law, hospitals have a financial incentive to focus on readmissions as well.
The key to achieving and maintaining good clinical outcomes and financial standing rests in the hospital's ability to effectively identify opportunities for improvement and successfully implement solutions within the organization. It can be an arduous process, but it can also be extremely rewarding. The time to act is now.
David Foster is chief scientist and Geoff Harkness is strategic services manager in the healthcare and science business of Thomson Reuters.
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