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Hospitals Try to Use 'Doc Fix' to Alter Health Law Penalties

By Kerry Young, CQ Roll Call

March 12, 2015 -- Hospital lobbyists are trying to weaken a penalty for readmitting a higher-than-average number of discharged patients using anticipated legislation that would delay a scheduled Medicare fee cut to physicians.

With Congress under pressure to block the cuts by the end of the month, the American Hospital Association (AHA) is trying to win relief for those hospitals that treat large numbers of poor people, who typically need more intensive levels of care. The vehicle could be a "doc fix" bill to replace a payment patch (PL 113-93) that expires March 31, said Megan Cundari, senior associate director of federal relations for the group.  

The AHA and allies such as the Association of American Medical Colleges also are trying to bolster support of companion bills (S 688, HR 1343) offered in the House and Senate addressing hospital readmission policy.

"Hospitals serving disproportionate numbers of disadvantaged, low-income patients have higher rates of readmissions, even when those hospitals provide high-quality, patient-focused care," said Sen. Joe Manchin III, D-W. Va., in a March 10 statement about the Senate bill he is sponsoring. "Failing to recognize this reality has led to unfair penalties at many rural hospitals in West Virginia and around the country."

Manchin's bill would require the Centers for Medicare and Medicaid Services (CMS) to account for patients' socioeconomic status when calculating risk-adjusted readmission policies, according to a summary. It would require separate studies of the 30-day threshold for readmissions after discharge that would trigger penalties, and whether certain medical conditions that require frequent hospitalization should be excluded in calculating the penalties. Both the Manchin bill and the House measure, offered by James B. Renacci, R-Ohio, have bipartisan support.

The effort is rekindling a long-running debate about how to apply the hospital readmission reduction penalty program, which many policy experts see as one of the clear wins arising the implementation of the 2010 health care law (PL 111-148, PL 111-152).

Medicare saw 150,000 fewer readmissions of people enrolled in the program between January 2012 and December 2013, with the penalty in place for people suffering heart attacks, heart failure and pneumonia. Capped first at 1 percent of a hospital's inpatient base operating payments, the penalty has risen to 3 percent in fiscal 2015.

"The readmissions policy is having the desired effect of inducing hospitals to make greater efforts to coordinate care and reduce readmissions," said Medicare Payment Advisory Commission Chairman Glenn M. Hackbarth in a comment on CMS' fiscal 2015 payment rule for hospitals. "However, there is an urgent need to improve the methods used to compute readmission rates and set readmission targets."

Much of the debate centers around how to weigh in the socio-economic status (SES) of patients seen at hospitals. MedPAC has suggested using peer grouping to adjust penalties for hospitals that treat impoverished communities, an approach that would require changing current law on the readmission reduction program.

There was far from an unanimous take on whether to adjust the penalty for hospitals that treat more people living in or near poverty, CMS said. Some commenters noted that the same protocols for care that work to prevent readmissions in affluent communities should work in poor ones. And, CMS raised objections to some ideas, such as those offered in bills introduced in the 113th congressional session by Manchin and Renacci regarding readmission penalties.

"We continue to have concerns about holding hospitals to different standards for the outcomes of their patients of low SES—we do not want to mask potential disparities or minimize incentives to improve the outcomes of disadvantaged populations," CMS said in its fiscal 2015 payment rule.

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