1. Understand the Penalty Conditions
CMS is authorized by the Hospital Readmission Reduction Program to start penalizing for excess readmissions for congestive heart failure (CHF), pneumonia, and acute myocardial infarction (AMI) in 2013. These conditions were chosen in part due to their high volumes and readmission rates, as well as their significant cost to Medicare. In 2015, the number of conditions will expand and will likely include chronic obstructive pulmonary disease, coronary artery bypass graft, percutaneous coronary interventions and vascular procedures. Again, penalties will not be limited to payment for the noted diagnoses, but will be levied against a hospital’s entire Medicare payment for the year. CMS defines readmissions as “all cause” with a few exceptions, such as hospital transfers and readmissions for hospice and radiation.
2. Calculate Your Revenue at Risk
There are 2 different methods for penalty calculation provided in the Patient Protection and Affordable Care Act (PPACA). The worse-case scenario is a 1% Medicare payment reduction across all DRGs in fiscal year 2013, increasing to 2% in 2014 and 3% in 2015. For example, if a hospital’s total inpatient payments from Medicare totaled $50 million in FY 2012, the hospital would lose $500,000 (1% of $50 million) of its inpatient operating payments in FY 2013. On the other hand, if the alternative calculation (described below) results in total excessive payments of less than the cap, Medicare payments will be reduced by that percentage.