Medicare’s Readmission Policy – Are You Re-Evaluating Your Revenue Objectives?

Patient readmissions are already a thorn in the side for hospitals and, thanks to healthcare reform, could have the potential to cut even deeper. The law requires the Centers for Medicare and Medicaid Services (CMS) to penalize hospitals with high readmission rates beginning in Fiscal Year (FY) 2013. To be fair, readmissions are a real financial quandary for Medicare. Approximately 18 percent of hospital patients are readmitted within 30 days of discharge every year, according to the Medicare Payment Advisory Commission, accounting for $15 billion in spending.

While many readmissions are indeed appropriate, research indicates that rates are unusually high following certain procedures and services and by all accounts, preventable in certain cases. The commission, which advised Congress on many of the healthcare reform legislation’s finer points, said that up to three-quarters of readmissions are potentially preventable. For these reasons, CMS will cut up to one percent of reimbursements to hospitals that have above-average 30-day readmission rates for patients with heart failure, heart attack or pneumonia.

What Does This Mean to You?

Have you dusted off your calculator and run the numbers to determine what the Medicare readmission policy could cost your organization? The Agency for Healthcare Research and Quality did and projects that 60 percent of qualifying acute-care facilities—about 2,300 in all—would see their payments reduced between $10,000 and $500,000 based on their current readmission rates.

The research also shows that the average penalty would be approximately 0.30 percent of inpatient payments—or roughly $88,000 per facility. Unfortunately, averages—and the provision itself—do not take into account disproportionate readmission rates at hospitals that serve higher numbers of low-income and indigent patients, a population that is more chronically ill and often can’t, or won’t, follow through with their ongoing care plans. According to a 2010 Thomson Reuters study, a hospital with 250 heart failure patients and a readmission rate 20 percent higher than average would lose $250,000 in Medicare pay.

Unlike other healthcare reform provisions that allow for increased reimbursements for healthcare organizations that demonstrate improved outcomes, the Medicare readmission rules do not reward hospitals for lowering readmission rates, which has some pundits wondering just how effective the program will be. But if the potential penalties don’t send a chill up your spine just yet, wait until 2014 when they rise to a three percent risk-adjusted maximum and cover more conditions, including many related to vascular surgeries.

What Can You Do?

There are many actions healthcare organizations can take to improve their readmission rates. Among them, caregivers can improve follow-up procedures to ensure the patient is complying with ongoing care plans, including taking prescribed medications and receiving regular evaluations. Steps should also be taken to facilitate care hand-offs by improving communications with specialists and the patient’s primary care physician.

These types of activities are often influenced by revised policies such as regular nurse case manager follow-up for the ongoing treatment of acute coronary syndrome, the effective use of Information Technology (IT) solutions that can assist with reconciling medications to avoid dangerous drug interactions and for tracking ongoing patient care through automated workflows. Both healthcare IT and policy change initiatives, amongst others initiatives, are hallmarks of emerging patient-centered care initiatives.

High readmission rates are a thorn that is not easily removed and could possibly cause even more pain. There will always be unpreventable readmissions for certain patients, but the rate of avoidable cases is simply too high in many areas of the country and changes can be made to help reduce such occurrences. The reality is that hospitals that don’t make the proper adjustments today will face significant revenue cycle challenges in the future.

To find out how Emdeon Revenue Cycle Analytics solution can help, listen to a recent HFMA webinar “Effective Strategies for Reducing Medicare Readmissions,” or visit us online.

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