Blog | Medicare Compliance RAC OIG

Key Steps on the Path to Reducing Readmission Penalties

Blog | Medicare Compliance RAC OIG

Key Steps on the Path to Reducing Readmission Penalties

Karen Bush discusses strategies to reduce readmissions.

Despite declining readmission rates, hospitals will be hit this year with $528 million worth of readmission penalties by the Centers for Medicare & Medicaid Services (CMS), according to an August 2016 report in Kaiser Health News. In its proposed rule for the 2018 Medicare inpatient prospective payment system, CMS states that it anticipates 2,591 hospitals will experience a reduction in their base operating DRG payment. That adds up to about $564 million in FY18 savings to the agency’s Hospital Readmissions Reduction Program (HRRP), launched in 2013 as part of the Affordable Care Act. Hospitals with excessive readmissions face a reduction of up to 3 percent (the cap since 2015) off the base DRG rate. All Medicare-eligible hospitals are subject to the program.

CMS has been gradually adding conditions to which the penalty applies, including heart attacks, heart failure, pneumonia, chronic obstructive pulmonary disease, total knee and total hip replacements, and coronary artery bypass graft surgery. Fine amounts also are based on a facility’s three-year average readmission rate relative to that of every other Medicare-eligible hospital, guaranteeing a certain subset of hospitals will be financially penalized. Providers know what that average is only on hindsight, and it’s an ever-moving target.

Penalties assessed in the current year are based on readmissions that occurred over the first three of the last five years (e.g., July 2012 – June 2015 for 2017 penalties), so facilities must look through the rearview mirror to assess the impact of the work they were doing during the relevant time span—while blindly competing with their peers in the present day.

All too often, hospital administrators and boards prematurely eliminate good programs—or buy into “solutions” to nonexistent problems—by ignoring that lag time between measurement of readmission rates and the resulting penalties. They may even be wholly unaware their facility has a readmission issue, even though CMS publicly reports on excess readmissions every October on its Hospital Compare website.

Hospitals subject to HRRP should keep in mind the following considerations when assessing their own readmissions.

Address penalties individually, not altering existing initiatives in response to new penalties. Healthcare organizations should explore what initiatives were at play during the time of the CMS readmission assessment, looking for clues about what’s working and what’s not. They should examine why certain units do better than others in implementing systemwide initiatives and, as appropriate, replicate whatever led to significant improvement in one area (e.g., heart failure) to other conditions subject to CMS readmission scrutiny (e.g., total knee replacement).

Don’t use readmission rates as the sole measure of programs designed to reduce readmissions. The beneficial effects of the initiative’s patient education-component also should be considered. Six questions on the HCAHPS satisfaction survey required by CMS are specific to care transitions and discharge. An organization that is effectively implementing a hospital-to-home transition program for patients should see a bump in its HCAHPS scores that could in turn help in other areas—notably, value-based purchasing.

Regularly assess reasons for readmissions. A healthcare organization should convene a multidisciplinary committee that includes physicians in the relevant specialties, nurses, hospitalists, service-line leaders, and a representative from the emergency department.

Obtain real-time data analysis. The most current information can help an organization get a handle on its performance and identify steps for improvement.

Organizations can work to reduce readmissions across the board by adopting the following best practices:

  • Make the discharge summary available in the patients’ medical chart in a timely manner (generally within 72 hours of discharge).
  • Schedule follow-up appointments with community-based physicians prior to discharge.
  • Ensure patients comprehend and recall the information presented to them by asking them to explain it back.
  • Reconcile medication at admission, whenever patients are transferred to another unit, at the point of discharge, and at the time of a post-discharge phone contact or office visit.

The good news for facilities that care for a large number patients who are eligible for both Medicaid and Medicare—and thus at higher risk for both readmission penalties and a longer stay in the penalty program—is that they will soon be carved out as their own comparator group within the HRRP. The 21st Century Cures Act, passed by Congress last December, instructs CMS to use a peer-group method of looking at readmissions, starting with dually eligible patients as an initial indicator and seeking comment on other social indicators, data sources, and methods for calculating social risk factors. The proposed rule, currently in the comment period, is set to take effect in 2019.

No facility can afford to wait on reducing patient readmissions. Emerging bundled payment models, all based on the cost of care through 90 days post-discharge, also factor in excess days post-discharge (including readmissions) into composite quality scores that help determine payment. It is going to cost hospitals more money to take care of those patients—both those covered by Medicare and those with private insurance.


Karen Bush, MSN, FNP, BC, NCRP, is a director for Clinical Data Solutions, part of the physician services team at HealthTrust in Nashville, Tenn. 

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Karen Bush

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