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MedPac Ponders Tweaks in Medicare Readmissions Policy

By Jane Norman, CQ HealthBeat Associate Editor

March 7, 2013 -- Hospitals are moving to reduce their readmissions in reaction to changes in Medicare policy, including financial penalties. But nothing's perfect, and Medicare Payment Advisory Commission members have continued their debate on ways to refine and revise the much-discussed fines.

The good news in the eyes of MedPac commissioners and their staff is that the relatively new Medicare readmissions policy might already be having an effect.

From 2009 to 2011, there was a 0.7 percent decline in the number of Medicare patients with all kinds of medical conditions who returned to hospitals within 30 days of discharge and whose second visits might have been prevented, the commission staff found. In addition, the Centers for Medicare and Medicaid Services has reported that readmission rates declined from 2011 to the second half of 2012, MedPac staff members said.

The CMS began a readmission reduction program in 2010, and the penalties went into effect in October 2012. Fines this year are based on hospitals' performance from 2009 to 2011 in connection with three conditions: heart failure, pneumonia and heart attack.

While the penalties, which amount to 1 percent of base operating payments, will be on average just $125,000 per hospital in 2013, they are scheduled to increase annually until 2015 and are a matter of major concern for hospitals as well as the patients they serve. A high readmission rate could be an indication of a low quality of care.

Hospitals Responding

In reaction to the new emphasis on readmissions, hospitals are doing more to identify the patients at increased risk of returning soon, improving transitions from the hospital to home with better patient education and self management as well as scheduling follow-up visits before discharge, MedPac staff said. Hospitals are also calling or visiting with patients after discharge and trying to communicate better with doctors or other health care providers outside the hospital.

But the MedPac staff also outlined problems with the new readmissions penalty policy. For example, even if hospital industry performance improves when it comes to readmissions, the percentage of the penalty doesn't change. And the socioeconomic status of patients served may affect readmission rates, MedPac staff said. Admission rates may be higher at hospitals that treat many low-income patients who have less access to adequate health care outside the hospital. Such patients arrive sicker and may wind up at the hospital again a short time after discharge.

One main question the commissioners debated was whether it would be better to take all medical conditions into account over a three-year period when calculating readmission rates, instead of just the three conditions now used. That would make it clearer whether performance is really improving at hospitals with small numbers of such cases. Most commissioners seemed warm to that idea. Mary Naylor of the University of Pennsylvania School of Nursing called it a "very important target," though she also said it's key to take socioeconomic status into account.

However, Bill Gradison, a former congressman now at the Fuqua School of Business at Duke University, objected to the idea that any changes in the readmissions policy should bring about an overall budget-neutral result. Budget policy frequently drives health policy and "not always in a wise direction," Gradison said. "The penalty ought to be we don't pay you for the readmission," he added.

Scott Armstrong of the Group Health Cooperative in Seattle said that excessive readmissions are a symptom of a health care system that's not working well and that he's frustrated by dealing only with "payment policy tweaks." Commission Chairman Glenn M. Hackbarth said MedPac began looking at readmissions with the idea that it would be an opportunity for study while larger changes in the Medicare fee-for-service system were embarked on.

Commissioners didn't take any action, but their continued consideration of readmissions policy may signal a recommendation down the line. MedPac also took on this issue in a September meeting.

The commission is an independent body that advises Medicare on policy, and its 2008 recommendation helped produce the Centers for Medicare and Medicaid Services policy that this year will mean some hospitals will see reductions of as much as 1 percent of their reimbursements because of excessive readmissions. That maximum possible reduction will rise to 3 percent by 2015.

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