Posts Tagged ‘popualtion health’

Reporter: Alan F. Kaul, Pharm.D., M.S., M.B.A., FCCP


Centers for Medicare and Medicaid (CMS) Targets Hospital Readmissions – Update on Practices and Policy


An earlier post on June 8, 2012 in Pharmaceutical Intelligence presented an overview of the Hospital Readmissions Reduction Program (HRRP) and its requirement to reduce payments under the Inpatient Prospective Payment System (IPPS) to hospitals reporting excess readmissions commencing with discharges on October 1, 2012.  As CMS moved forward with HRRP, hospitals readiness for population based accountable care seemed questionable based on a 34 percent survey response or 1,672 hospitals.


According to Medicare Payment Advisory Commission (MedPAC) report, approximately two-thirds of hospitals will be penalized (capped at 1 percent) for above average readmissions commencing October 1, 2012. This penalty will escalate to 2% in 2014 and 3 percent in 2015.  Looking at the hospital readmission measures for Acute Myocardial Infarction (AMI), Heart Failure (HF), and Pneumonia (PN), this penalty will average $125,000 per hospital. Overall, the CMS payment to all hospitals will be reduced by 0.24 percent.  A preliminary analysis indicated little variation by hospital type (i.e., urban, rural, teaching, non-teaching, profit, non-profit).


MedPAC pointed out several long-term issues with the readmission reduction program including:


  • Computing the penalty multiple – Penalty increases as readmission rate decreases and the penalty multiplier differs for each condition. Solutions could include using a fixed multiplier, using all-condition readmissions, and eliminating the multiplier and setting a lower target readmission rate to maintain budget neutrality
  • Random variation and small number of observations – Solutions could include using all-condition readmissions, using more than the 3 years of data currently used, and allowing hospitals to aggregate performance within a system for penalty purposed while continuing to report individual hospital performance
  • Unrelated and planned readmissions – Solutions could include switching to a-condition measures that have exceptions for planned and unrelated readmissions such as the Yale all condition model or the 3M all-condition model.
  • Socio-economic status and risk-reduction- Possible situations may include allow current incentives to close the gap, comparing hospitals against similar hospitals to compute the penalty, and providing financial assistance to hospitals with a disproportionate share of low-income patients


Moving forward in refining the policy several objectives were noted: maintaining or increasing average hospitals’ incentive to reduce readmissions; increasing the share of hospitals with an incentive to reduce readmissions; making any penalty a consistent multiple of the cost of readmissions; being at least budget neutral to current policy, with a preference for lower readmission rates rather than higher penalties. Any policy refinements will require a change in law and must proceed carefully. Sept 12 presentation.pdf


On October 3, 2012, CMS issues a notice indicating that errors were discovered in its initial calculation for readmissions penalties under the Inpatient Prospective Payment Systems (IPPS) that went into effect the beginning of October. The revisions were in part to implement capital and operating related costs to acute care hospitals arising from CMS’s continued experience with the systems. Also updated were payment policies and rate of increase limits for certain hospitals excluded from IPPS and paid under Medicare’s Prospective Payment System such as Long Term Acute Care Hospitals (LTACHs).


Based on a Kaiser analysis of the miscalculation, 1,422 hospitals will lose more and 55 hospitals will lose less than originally projected. The changes were tiny averaging 0.002 percent of a hospital’s regular Medicare reimbursement. A total of 2,217 hospitals are being punished in the first year of the program which began on October 1, 2012. Of those punished, 307 (14%) will be penalized the maximum 1% of their regular Medicare reimbursement.


As reported in the Napa Valley Register on October 14, 2012, variations in local practices patterns are already being noticed. For example in Napa Valley, Queen of Valley Medical Center has a 18 percent readmission rate, St. Helena Hospital a 13 percent readmission rate, and Kaiser Permanente Vallejo Medical Center a 7 percent readmission rate. Local hospital officials are claiming that reduced readmissions incorrectly assumes better care and that not making exceptions for unavoidable readmissions are policy flaws.  While officials at Kaiser Permanente of Northern California indicated that they had no concerns about the policy change because “it promotes co-ordianation of care, individuals at Queen of Valley Medical Center and St Helena’s Hospital expressed a variety of concerns from the fragile natur of patients in certain of the included diagnoses and the 30-day time fram to evaluate readmissions.  Moving forward to lower readmission rates at Queen and St. Helena indicated that they will pay more attention as patients are discharged from the hospitals during transitions of care, Professionals will coach patients in self-management through home visits and phone-calls after they have been discharged from the hospital.









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