Summary: What are you doing to make sure you are not one of the 66% of hospitals which will be assessed readmission penalties in the next round? Can you afford the penalties which are increasing again in 2015? Are you aware of the proposed conditions to be added in 2015?

What do you get when you combine Medicare, high readmissions, within a 30 day window, for specific conditions?

A reduction in Medicare spending to the tune of about $280 million annually. Of interest is that penalties were assessed in 49 states, with the exception of Maryland, which has a unique reimbursement payment system.

What spurred the creation of the Medicare Readmission Reduction Program?

The goals of reducing healthcare spending and improving the quality of healthcare. The Affordable Care Act (ACA) was enacted in 2010 with these overarching goals in mind. Every aspect of healthcare has been or is being reviewed to see if improvement can be made in one or both of these areas. As such, one area that has come to the forefront is that of avoidable or preventable readmissions.

Initially, hospitals were required to report readmissions, over a 3 year period, in order to establish a baseline and determine which conditions would be included in the Readmissions Reduction Program. It is important to note that reporting is for all readmissions, regardless of payer, regardless of condition, and regardless of circumstances. Additionally, the goal was to improve transparency among hospitals and provide a way to contrast and compare readmission rates among hospitals. The ACA delegates responsibility to the Department of Health and Human Services to:

• Formally define what a readmission is in terms of assessing penalties
• Identify which conditions would be included in the program
• Provide a methodology to calculate readmission rates and therefore excess readmission rates
• Establish a policy for readmissions that takes into account risk-adjusted factors
• Establish a 3-year period of discharge data to be used as a baseline which includes at least 25 cases per approved condition
• Update approved conditions (high volume and / or high expenditure) as additional data becomes available

What kind of readmission penalties are we talking about?

CMS, as directed by the HHS, assessed penalties to just over 2,200 hospitals in the first year of the program, which equates to about $280 million, with the average penalty assessed per hospital about $125,000. So, 2,200 doesn’t sound like a particularly large number, right? Well it equates to about 2/3 of all eligible hospitals, so becomes quite significant. CMS has set forth the following penalty schedule:

• 2013 – 1% of Medicare payments
• 2014 – 2% of Medicare payments
• 2015 – 3% of Medicare payments, which is the current cap

What are the current and proposed conditions in which a hospital can be penalized for excess readmissions?

The initial conditions included in the program include:

• Acute Myocardial Infarction
• Heart Failure
• Pneumonia

As of 2015, CMS has proposed 2 additional conditions for which penalties can be assessed:

• Chronic Obstructive Pulmonary Disease (COPD)
• Elective Hip and Knee Replacements

So you are thinking, that the penalties will only be assessed for patients that presented with one of the included conditions, right?

You couldn’t be further wrong. If your hospital is deemed to have excessive readmissions as defined by CMS, you will receive a penalty against all Medicare reimbursement received, across the board, if you will. This is why the penalties are such a big deal and are amounting to millions of dollars annually.

Are there any exceptions to the Readmission Reduction Program?

The short answer is yes. There are specific exclusions to the program which include:

• Planned readmissions which might include follow-up to surgery or rehabilitation
• Transferring a patient from one eligible hospital to another
• A readmission which is unrelated to the initial admission

Are there any hospitals which are excluded from the program?

There are several currently, but predict one or more may be added in the near future. These exceptions include:

• Critical access
• Psychiatric
• Rehabilitation
• Long-term care
• Children’s hospitals
• Cancer hospitals

What are you doing to reduce readmissions? Have you been assessed penalties previously? Can you afford these Medicare reductions? Are you constantly mining your data to see where improvements can be made? Do you have any criticisms as to the program, how penalties are calculated, how penalties are assessed, or how hospitals are compared in regard to socioeconomic factors, patient mix?

We would love to hear your comments, suggestions, and best practices.

BHM is a healthcare management consulting firm whose specialty is optimizing profitability while improving care in a variety of health care settings. BHM has worked both nationally and internationally with managed care organizations, providers, hospitals, and insurers. In addition to this BHM offers a wide breadth of services ranging including healthcare transformation assistance, strategic planning and organizational analysis, accreditation consulting, healthcare financial analysis, physician advisor/peer review, and organizational development.