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By Bernard J. Wolfson and Ronald Campbell, The Orange County Register

Medicare will dock payments this year for hospitals in hopes of spurring them to reduce the number of patients who are re-hospitalized too quickly.

Government and commercial insurers view lower readmissions as a sign of higher-quality care and greater cost consciousness by hospitals.

The pay cuts, coming under the Affordable Care Act, are among the many factors motivating hospitals to spend more time educating patients about their illnesses and partnering with outside caregivers to ensure that treatment doesn’t stop after discharge.

The move coincides with broader changes afoot in the industry, as payments from government and commercial insurers are based increasingly on medical outcomes rather than the volume of services provided. Under increasing pressure from more empty beds and lower revenues, hospitals are pondering new models that rely less on traditional inpatient business.

For patients, especially people with serious diseases, the new thrust means closer monitoring while they are in the hospital and a more seamless transition to follow-up care after they leave. In many cases, it also affords them a host of support services to ensure they are following their post-discharge marching orders and getting the medical attention they need.

The penalties, levied on hospitals that readmit too many patients within a month of their discharge, come in the form of reductions in Medicare payments for inpatient care.

Many hospital executives, however, say Medicare’s formula for setting the penalties is not entirely fair. And some doctors warn that discouraging readmissions is not always the best thing for patients.

“There are things we don’t control, and we certainly don’t control patient behavior either,” said Nancy Pratt, chief quality and patient safety officer for Irvine, California-based St. Joseph Health System.

“You could do everything right and still end up having a patient readmitted.”

The Medicare payment cuts seem small — just $227 million nationwide — but hospital operators and industry analysts say they are yet one more squeeze on revenues in a new world of declining reimbursements. And money aside, hospitals must pay attention to their reputations.

“The bottom line is no hospitals want to have on their records that they have a number of violations or penalties,” said Jim Lott, a former senior executive with the Hospital Association of Southern California who now consults with hospitals on improving post-discharge care and reducing readmissions. “You can charge them $100,000; you can charge them $5,000. It’s more important that you not have any negative hits on your record, because that’s what messes with you in the marketplace.”

Hospitals getting payment cuts can lose anywhere from hundreds of thousands of dollars to only a few thousand. Medicare inpatient payments nationwide totaled nearly $140 billion in 2012, the most recent year for which data are available.

This year, the maximum readmissions fine on any hospital is 2 percent, up from 1 percent in 2013, the first year of the penalty program. It maxes out at 3 percent next year. Eighteen hospitals in the U.S. got the maximum penalty this year.

About 12 percent of Medicare patients readmitted to the hospital may not need to be, according to a study by the Medicare Payment Advisory Commission, a congressional agency. Reducing these preventable readmissions by 10 percent could save Medicare $1 billion annually, the report found.

Although Medicare tracks readmissions for all causes, it is penalizing hospitals this year for only three types of cases: pneumonia, heart attack and heart failure. It has recently added two more — chronic obstructive pulmonary disorder and hip and joint replacements — for which excess readmissions will be factored into penalties next year.

For the most part, hospitals seem resigned to the payment reduction program, but they are not happy about it. They say it punishes them for factors beyond their control and hits hospitals serving the poor the hardest. Some argue that the stick approach creates an environment of fear and anxiety that is not conducive to the kind of communication needed to avoid errors and optimize care.

“Fundamentally, the penalties can have a very chilling effect,” said Julianne Morath, president and CEO of the Hospital Quality Institute, which was founded by the California Hospital Association and its regional affiliates. “If there isn’t an environment of trust and safety, people don’t speak up and learn. And if you don’t learn, you can’t predict, and if you can’t predict, you can’t prevent.”

Morath and many others argue that one of the biggest flaws in Medicare’s penalty system is that if a patient is readmitted within 30 days to any hospital, for any reason — even one totally unrelated to the original diagnosis — it still counts against the hospital that first admitted him.

Pratt, the St. Joseph quality control officer, noted that it may be particularly difficult to control patients’ health behavior in lower-income communities where resources and in-home support can often be lacking. None of St. Joseph’s hospitals in well-off Orange County, Calif., were penalized for excess readmissions, but its St. Mary Medical Center in Apple Valley, Calif., will have to forgo 0.61 percent of its Medicare inpatient payments this year.

“The high desert is socioeconomically different than Orange County, and to the extent that influences people’s health-seeking behavior, that’s one of the factors at work,” Pratt said.

Medicare has recognized that hospitals serving a high proportion of low-income people tend to suffer larger payment cuts because of high readmission rates. According to an analysis by the Orange County Register, such hospitals are about 25 percent more likely to be penalized.

Even those who highlight problems with the penalty program, however, laud it for inducing hospitals to work more closely — and in some cases for the first time — with outside doctors, nursing homes, home caregivers and families to ensure that discharged patients take their medications, eat the right foods and show up for follow-up appointments with their physicians. All of those factors are good predictors of whether a patient will avoid a return trip to the hospital.

“Trying to make sure this handoff between inpatient hospitalist … and the outpatient physician is seamless has some positive reward even unrelated to readmissions,” said Dhruv Kazi, an assistant adjunct professor in the division of cardiology at the University of California-San Francisco. “The focus on patient education, transition of care, and medication reconciliation — all of these are good for their own sake.”

Most hospital quality experts agree that the key to reducing unwanted readmissions is to monitor high-risk patients while they are in the hospital, make sure they or a family member understands every detail of their post-discharge orders, and then follow up after they leave to make sure they are sticking to the plan.

Patients at the highest risk for being readmitted are the ones who have multiple chronic diseases and take eight or more medications, said Giovanni Corzo, a vice president of Anaheim, Calif.-based SeniorServ, part of a Medicare-funded demonstration project to reduce hospital readmissions.

It is partnering with four Orange County hospitals — University of California-Irvine Medical Center, Western Medical Center Santa Ana, Anaheim Regional Medical Center and St. Jude — to address some of the common problems that can drive readmissions higher.

SeniorServ employs social workers — and will soon hire nurses as well — to make home visits and connect discharged patients with services that include home-delivered meals and transportation to doctor appointments. Readmission rates for the four participating hospitals, which were around 20 percent, have been reduced to just 6 percent, Corzo said.

Other hospitals are conducting similar efforts to reduce readmissions.

Photo: Rusty Clark via Flickr

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