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Medicare Pay Cuts for Poor Readmission Scores Begin

Cheryl Clark, for HealthLeaders Media, October 1, 2012

It's Oct. 1, the day some acute care hospitals have been eagerly awaiting...and which others have been dreading.

Because today the Patient Protection and Affordable Care Act begins its two-pronged impact on the way hospitals receive payment for care provided to Medicare patients, arguably the most significant pay-for-performance program impacting acute care facilities in federal history.

There are winners and losers. And if hospitals don't have a pretty good idea by now how they're performing, they should.

The two provisions of the law (Section 3001, for value-based purchasing incentives for quality; and Section 3025, penalties for excess 30-day readmissions) work somewhat differently.

But these two new rules each can impact up to 1% of a hospital's base Medicare diagnostic-related group (DRG) payments between now and Aug. 31, 2013, when new formulas will kick in. 

In theory, a hospital that performs poorly in both categories could endure a penalty of 2%. For some struggling hospitals, that represents a significant chunk of payment, although at first glance no hospital will be penalized that severely.

It doesn't seem like a lot of money, but when you're a hospital with a 1 to 2% margin, a 1% to 2% penalty on Medicare payments can add up fast.

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