Barton Associates: Are Medicare’s readmission penalties fair?

Analysis has shown there are clear winners and losers when it comes to the Hospital Readmissions Reduction Program, and it may not be solely based on hospital performance. The Hospital Readmissions Reduction Program (HRRP) was created as part of the Affordable Care Act (ACA). The program penalizes hospitals that have a high rate of heart attack, heart failure, or pneumonia patients who return to the hospital within 30 days of being discharged. Medicare has created a formula based on the hospital’s case mix, specifically the patient population’s comorbid conditions, age, and gender, as to how many readmissions it should have. If the hospital reports a readmission rate that is higher than Medicare’s estimate, it will see its overall Medicare payments cut. The maximum penalty is 1% for 2013, but will move up to 2% in 2014, and 3% the following year. Medicare also plans to extend the program to include more common diagnoses. Although Medicare’s formula takes case mix into account when calculating a hospitals projected readmission rate, experts say it doesn’t take into account other key factors such as the patient population’s socioeconomic status, insurance coverage, employment situation, and social support system, which are all critical to readmission prevention. For this reason, The Commonwealth Fund released a report that says safety-net hospitals, organizations that serve a disproportionate number of low-income, uninsured, and vulnerable populations, are 30% more likely to have 30-day hospital readmission rates above the national average, and are disproportionately impacted by the HRRP. On the other hand, an article in MedScape found that physician-owned hospitals are less likely to face readmission penalties. This is because many do not treat patients that have the diagnoses Medicare is tracking, such as heart failure and heart attack. Kaiser Health News data also shows physician-owned hospitals are less likely to treat low income patients. According to a Kaiser Health News article, members of the Medicare Payment Advisory Commission (MedPAC) said it would back possible changes that would take the economic profile of a hospital’s patients into account when setting the penalties. However, any real changes to the HRRP would have to come from Congress, which is still engaged in a bitter battle over the ACA.