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Medicare Readmission Penalties Punish Low-Income Hospitals

Posted on Jun 17, 2013 by Ailee Slater ()  | Tags: Affordable Care Act, Howard University Hospita, low-income hospitals, medicare, Medicare readmission, Medicare readmission penalties, MedPAC, obamacare

When a patient is treated and released from the hospital, doctors don't want to see that patient again. Not that they are cold or cruel - a patient who leaves the hospital and doesn't return, at least not within the next 30 days, is a patient who is ably managing their health condition. However, a patient who is treated and then readmitted to hospital before the end of the month hasn't really been treated at all. Reducing hospital readmissions is important to improving the health of entire communities, and reducing hospital spending. The issue of readmissions is especially important to one group of patients, who return to hospital more often than any other type of health care user - Medicare patients.

There are many reasons why Medicare patients make more return visits to the hospital. People on Medicare are either disabled or 65 years and older, and generally have more chronic conditions than the average person. What's more, concurrent chronic conditions, such as diabetes and heart disease, can make each issue more difficult to manage. If a patient with two chronic diseases then comes down with a viral infection such as pneumonia, treatment may be complicated, and even after leaving the hospital, a Medicare patient may often find himself needing to return soon after that discharge.

In fact, high rates of Medicare readmission were so concerning that in 2008, the congressional advisory organization MedPAC (the Medicare Payment Advisory Commission) recommended a new policy to reduce Medicare readmissions and save money. MedPAC advised Congress that Medicare should keep closer tabs on hospitals' rates of readmissions, and reduce payments to those hospitals reporting the most patients that return within 30 days.

In 2010, those MedPAC recommendations became law, through a provision in Obama's Affordable Care Act. Section 3025 of the Affordable Care Act states that starting in October 2012, hospitals with high Medicare patient readmission rates must lose out on up to 1 percent of payments from Medicare. In October 2013, hospitals may lose out on 2 percent of Medicare payments, and in 2014, that penalty will go up to a potential 3 percent.

Patient readmission rates are calculated by a formula involving three years worth of discharge data, and comparisons to average national rates of returning Medicare patients. The readmission penalty and formula apply only to a few common conditions: pneumonia, heart attack and heart failure. All three of these issues should be able to be managed by the patient during her first month out of hospital; a readmission is costly to the hospital, and means that proper management of care has not occurred.

However, even though MedPAC championed these Medicare readmission penalties five years ago, the group now says that there is one major problem with fining hospitals - clinics that treat high numbers of low-income patients are being disproportionately affected.

In a semi-annual report just this month, MedPAC notes that across the nation, low-income Medicare patients are much more likely to be re-admitted to hospital after being treated for pneumonia or a heart condition. Despite hospitals' best efforts, those institutions that serve the most poor patients have high readmission rates when compared to a national average, and are therefore paying more readmission penalties than hospitals servings a wealthier population.

For example, a recent article by Kaiser Health News reports that in the District of Columbia, Howard University Hospital has paid more patient readmission penalties than any other hospital in the area. Howard University Hospital also serves the most low-income patients of the district. Since October 2012, Howard's Medicare payments have fallen by .95 percent. However, another hospital in the area, Sibley Memorial Hospital, is opposite to Howard in that it serves the least amount of low-income patients in the area. Sibley's rates of patient readmissions are quite low, and it has paid no penalty to Medicare.

The Howard/Sibley situation mirrors hospital readmissions throughout the United States. Poorer patients are more likely to be readmitted to the hospital, and MedPAC has called for a more thorough investigation into why this is true. It may be that because low-income patients have less money, they aren't able to follow through with doctors' medication or dietary orders once discharged from the hospital. Similarly, poor patients without a car may be unable to get to the pharmacy or find a grocery store selling nutritious items. A lack of transportation also means that the patient is less likely to pay an outpatient visit to his physician in the case of a minor complication, instead waiting until an emergency occurs and then once again entering into a hospital stay. Although doctors often try to follow up with former inpatients to avoid readmission, low-income patients may not have a stable telephone number or address, making it difficult to keep in touch and assure that the patient is managing his/her care.

What's clear is that no one wants to put hospitals serving low-income patients at a disadvantage. The recent MedPAC report recommends re-calibrating the current readmission penalty policy, in recognition of the fact that hospitals serving a low-income population have a harder task. Instead of the current penalty formula, MedPAC would like hospitals to set yearly readmission targets; hospitals meeting their goals can be rewarded with fewer penalties. Also, MedPAC suggests that instead of comparing all hospitals to a national average, low-income hospitals should be evaluated in comparison to other clinics that serve a similar population. In that way, the analysis of Medicare patient readmission will not unjustly penalize the hospitals that, in many ways, have the most need to maintain their financial resources.

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