The Issue

Hospitals should focus on three areas where poor performance is contributing to high numbers of Medicare readmissions: execution of the discharge plans, patient education, and coordination of postdischarge care.


Beginning Oct. 1, the Centers for Medicare & Medicaid Services (CMS) will penalize hospitals whose readmission rates for congestive heart failure (CHF), acute myocardial infarction (AMI, or heart attack), and pneumonia exceed the national average by withholding a percentage of these hospitals' total Medicare payments. Major insurers are following suit, announcing penalties for preventable readmissions.

Medicare spends $17.4 billion a year on readmissions, according to a study published in the April 2009 New England Journal of Medicine . Research by Thomson Reuters indicates that a hospital with Medicare inpatient operating payments of $250 million per year will face penalties $2.5 million if its readmission rates for CHF, AMI, and pneumonia exceed the national average by 1.4 percent (Healthcare Reform: Pending Changes to Reimbursement for 30-Day Readmissions, Aug. 31, 2010). The effect on hospitals will be more severe if its private insurers impose penalties of their own.

Activities related to patient discharge-including the level of patient education provided regarding the discharge plan, execution of the discharge plan, and coordination of care after discharge-can be strong predictors of whether a patient will be readmitted to the hospital. When an avoidable readmission occurs, it can often be pinpointed to one of three failures in the patient discharge and post-care process:

  • Poor execution of the discharge plan.
  • Lack of patient education.
  • Poor coordination of postdischarge care.

By taking a close look at these three primary reasons for avoidable readmissions-and developing preventive action around these categories-hospitals can begin to prevent such readmissions and protect patient safety as well as revenue.

Action Steps for Providers

Hospital leaders that are considering initiatives to reduce readmissions by improving discharge processes and postdischarge care should begin with five action steps:

  • Ascertain the hospital's Medicare 30-day readmission rates.
  • Based on these numbers, estimate the potential readmission penalties the organization may face, understanding that penalties will increase to 3 percent of all Medicare reimbursement by 2014.
  • Identify a clear strategy or program to reduce the organization's 30-day readmissions to avoid Medicare penalties.
  • Determine the overall direct and indirect costs of this strategy or program.
  • Calculate the initiative's potential ROI.

Reducing preventable readmissions will significantly affect the bottom line and quality scores of hospitals as Medicare and other payers apply readmission penalties and publish data related to hospital readmissions-and will improve value for payers, purchasers, and the communities an organization serves.

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Publication Date: Sunday, July 01, 2012

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