Curbing Medicare Spending begins with Hospital Readmissions

Medicare’s new “Value Based Purchasing Program” levied their first penalties to 2,217 hospitals last month. These hospitals will all receive some form of financial penalty from Medicare, with 307 of them receiving the maximum penalty of a 1% reduction in their Medicare reimbursement rate for the next year.

The program, previously reported by NAHAM News in September (Medicare’s new Value Based Purchasing Program: Enough to Inspire Hospital change?), penalizes hospitals with high readmission rates as part of the Healthcare Reform bill. While a major intent is to get Medicare costs under control (they exceed $550 billion this year), there is also intent to focus more on patient care. The program is expected to save $300 million in reimbursements this year, as well as pressure hospitals to take steps to ensure patient care both before and after they are discharged. Currently, almost 1 in 5 Medicare patients are readmitted to the hospital within a month, costing the government over $17 billion annually.

The previous system paid hospitals a set fee per patient stay, despite the length, so proponents of the new program were concerned that the emphasis was placed more on the number of patients treated, rather than the quality of care. This new system seeks to change that. The penalty is set to double (to 2%) in October of 2013, and will go up to 3% in October 2015.

The program is meeting with resistance from some. Academic medical centers are complaining that the penalties do not take into account the extra challenges posed by extremely sick and low-income patients. This claim is backed up by several studies, including one commissioned by Medicare, that have found that the hospitals with the most poor and African-American patients tended to have higher readmission rates than hospitals with more affluent and Caucasian patients. But these studies also determined that some safety-net hospitals performed better than average, showing that hospitals can overcome the challenges posed by the kinds of patients they treat.

Some researchers also fear that the penalties are too steep. They claim that steep penalties will distract hospitals from other pressing issues, like reducing infections and surgical mistakes, and ensuring patients’ needs are met promptly. There is also a concern that hospitals will try to get around the system, treating patients and sending them home within 24 hours to avoid admission and readmissions.

Overseeing former patients is expensive and time-consuming and many hospitals are relying on financing from community health organizations and foundations. Some may also partner with local organizations to provide follow up care to discharged patients.

No matter the method for reducing readmissions, hospitals will need to adjust to the new system

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See the full article from the New York Times and Kaiser Health News here.