Readmission reduction has begun and the penalties will escalate

Help prevent financial loss by changing your focus

Beginning Oct. 1, 2012, more than 2,000 hospitals serving Medicare patients began losing reimbursement under the Centers for Medicare & Medicaid Services (CMS) readmission reduction program, which penalizes hospitals experiencing excess 30-day readmissions for heart failure, acute myocardial infarction, and pneumonia. The average penalty is about $125,000.

This year, hospitals with the most readmissions within 30 days received up to a 1% reduction in reimbursement for every Medicare admission. In fiscal 2014, beginning Oct. 1, 2013, the penalty will rise to 2% and top out at 3% in fiscal 2015 beginning Oct. 1, 2014.

In last year’s Inpatient Prospective Payment System (IPPS) final rule, CMS reiterated its intention to add new diagnoses to the readmission reduction initiative beginning in fiscal 2015 but did not specify what diagnoses will be added. Chronic obstructive pulmonary disease, coronary artery bypass grafting, percutaneous transluminal coronary angioplasty (PTCA) and other vascular procedures are among those under consideration.

But it’s not going to stop there, adds Linda Sallee, MS, RN, CMAC, ACM, IQCI, director for Huron Healthcare, with headquarters in Chicago. “History tells us that while CMS is penalizing hospitals for excess readmissions in three diagnoses now and has announced plans to add four more, CMS is likely to continue to expand the number of diagnoses in the future. This means that hospitals need to look globally at readmissions in order to prevent losses in the future,” she says.

Preventing readmissions takes a complete paradigm change in the hospital’s focus, adds Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK.

“It’s a big transition for hospitals to focus on preventing admissions when historically the emphasis has been on filling beds, but payers are shifting from basing reimbursement on quantity to reimbursing hospitals and other payers for providing quality care,” she adds.

Many hospitals were not focusing on reducing readmissions when the Centers for Medicare & Medicaid Services began looking at readmissions in 2009, Hale points out. “It’s been only in the past 12 months that many hospitals have become conscientious about looking for ways to prevent readmissions,” Hale adds.

Hospitals that were not penalized planned ahead by targeting DRGs with high readmission rates and looking for ways to improve transitions, Sallee says. “Hospitals really have to change their focus. The key from a financial perspective as well as a patient-care perspective is providing the right care at the right place and the right time,” she says.

Readmission rates are risk-adjusted, Hale points out. That’s why it’s so important for the documentation to reflect the severity of illness so the hospital won’t lose reimbursement, she says. Case managers should work collaboratively with the clinical documentation specialists to make sure that the patient’s condition and services received are completely and accurately documented, she says.

As a way to avoid readmission penalties, some hospitals have been ordering observation services for all patients who come back to the hospital within 30 days, rather than admitting them as inpatients, says Ralph Wuebker, MD, MBA, chief medical officer for Executive Health Resources, a Newton Square, PA, physician advisor. “This is not the right thing to do for a number of reasons and from a compliance standpoint. Hospitals should do what is medically necessary for each patient every time,” he says.

When Medicare patients are kept in an observation setting, they are responsible for a percentage of the Medicare-approved services, including observation services as well as any medications that could be self-administered. In some instances, beneficiaries may have purchased Medicare supplemental insurance that covers these expenses, he points out. He has seen cases where patients who received observation services for several days were hit with bills totaling as much as $10,000. “When hospitals place patients in ‘observation’ inappropriately, an unnecessary financial burden is put on patients. If observation is appropriate, that’s OK, but artificial drivers should not affect the setting in which a patient is receiving care,” he says.

Case managers are a huge resource when it comes to creating smooth transitions and collaborating with providers at other levels of care, says Teresa Treiger, RN-BC, MA, CHCQM-CM/TOC, CCM, president of Ascent Care Management LLC, a case management consulting firm based in Holbrook, MA. “When case managers develop a transition plan, they can’t limit their thinking to determining where the patient is going next. They have to look at what will happen at the next level of care and create a transition plan that transcends the whole continuum of care. This must be done in a collaborative manner among all the care team members, and most importantly, the patient,” she says.

There’s been an explosion of transition of care programs, but they are still operating in silos, Treiger says. “While these are well-intentioned programs, hospitals and other providers don’t always work together, so it is creating a different set of problems with redundancy in effort,” she says.

Hospitals, payers, and primary care providers all have transition of care programs. Once patients get home from the hospital, they’re getting multiple calls from people asking the same questions, Treiger says.

“This is going to create a significant consumer backlash. Patients have complained for years that they have to fill out forms asking the same questions in the primary care office, the specialist office, and the hospital. Now they have people calling them with the same questions,” she says.

All of this consumer frustration will begin to affect hospital and provider quality ratings on the Hospital Consumer Assessment of Health Care Providers and Systems (HCAHPS) and other surveys, Treiger says. “Patient perception of healthcare providers is having more and more influence on reimbursement. If there continue to be redundancies, or patient perception worsens due to lack of collaboration, it follows that the rating will reflect that accordingly,” she adds.

“To help lessen duplicate effort and to maximize everyone’s hard work, case managers across the continuum should coordinate more effectively with each other. This will go a long way towards making sure care team members all are on the same page and not duplicating their follow-up initiative,” she adds.

Hospitals also need to work with neighboring hospitals to identify the types of patients with ongoing health problems who are at risk for readmissions so that the healthcare team will be aware of the issue whatever emergency department that patient goes to, Treiger suggests. “Hospitals want to distinguish themselves from the competition, but they hurt themselves in the long run if they don’t work together,” she says. “While business, privacy and patient confidentiality have to be taken into consideration, they should not preclude hospital representatives from having “meetings of the mind” in order to improve the overall health and healthcare delivery of their respective communities,” she adds.

If your hospital avoided readmission penalties this year, you can’t rest on your laurels, Sallee warns. Keep in mind that CMS will assess penalties on hospitals in the top tier of readmissions and if other hospitals’ improvements outpace yours, you could be penalized in the future. “Hospitals can’t let their eye off the ball for a second or they’ll find themselves losing reimbursement. They have to continue to get better and better,” she says.