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Mark Aspenson
Sunil Hazaray

High readmission rates increase the cost of Medicare expenditures by $17.4 billion annually, according to a study published in the New England Journal of Medicine (Jencks, S., et al., "Rehospitalizations Among Patients in the Medicare Fee-for-Service Program," April 2009). They also have an impact on quality of patient care and patient satisfaction. To reduce avoidable readmissions, the Centers for Medicare & Medicaid Services (CMS) and other agencies have undertaken several measures.

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. Medicare will deduct total hospital payments by a factor of the excess of the hospital's readmission rates over the national average for hospitals whose readmission rates are above the 50th percentile (Healthcare Reform: Pending Changes to Reimbursement for 30-Day Readmissions, Aug. 31, 2010). The impact on hospitals will be even worse if private insurers follow suit.

In addition, the national Quality Improvement Organization (QIO) has the authority to deny readmission DRGs if a readmission violates quality-of-care standards. Section 40.2.5 of the Medicare Claims Processing Manual (chapter three) states that "the QIO's authority to review and to deny readmissions and to deny readmissions when appropriate is not limited to readmissions within 30 days. The QIO has the authority to deny the second admission to the same or another acute PPS hospital, no matter how many days have elapsed since the patient's discharge."

Value based purchasing-an initiative put in place by CMS-judges hospitals based on their processes of care and scores related to patient satisfaction. These two factors have elements of readmission factors built into them.

To add to the financial risks, major insurers such as United Healthcare and Aetna have announced plans to follow CMS in penalizing hospitals for readmissions. Measures such as these will incentivize hospitals to maintain readmission rates that are below the national average for CHF, AMI, and pneumonia. This intuitively will continue to lower the national readmission average, as greater numbers of hospital systems strive to stay out of the penalty zone.

For more information, see Mark Aspenson's and Sunil Hazaray's "The Clock is Ticking on Readmission Penalties,"hfm, July 2012


Publication Date: Monday, July 02, 2012

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