How Bundled Payments Ratchet Readmission Rates Downward

Christopher Cheney, June 20, 2016

Care coordination and bundled payments are cost-lowering drivers. "It's not savings to the hospital," says one executive. "It's avoided medical cost."

This article first appeared in the June 2016 issue of HealthLeaders magazine.

With prodding from federal officials and an industrywide shift toward delivering services based on value rather than volume, healthcare providers are making progress on reducing hospital readmission rates, federal statistics show.

From 2007 to 2011, the all-cause 30-day hospital readmission rate for Medicare fee-for-service beneficiaries held steady at about 19% to 19.5%, according to the Centers for Medicare & Medicaid Services. But those rates fell to 18.5% in 2012 and 17.5% in 2013, CMS reports.

Brian Holzer
Brian Holzer

"We've seen amazing results already," says Brian Holzer, MD, MBA, senior vice president for home and community services at Pittsburgh-based Allegheny Health Network, which has expanded postacute care services and partnerships dramatically over the past two years. In 2014, AHN—an integrated system that reports $2.4 billion in revenue and 82,000 annual discharges—purchased four companies to establish a full suite of home health services: nursing, home medical equipment, home infusion, and hospice. Compared to 2014, AHN posted a 5% decrease in all-cause hospital readmissions last year in the health system's home-health service line, mainly on the strength of its home-health business unit, Healthcare @ Home, and improved care coordination with skilled nursing facilities, he says. The estimated cost avoidance resulting from the lower readmissions rate among AHN's home-health patients last year is $4.5 million.

While cost avoidance for patients and payers is a step forward in value-based medicine, financial incentives aligned with the new care models that drive down hospital readmissions are needed to expand and sustain value-based delivery of services, he says. "This isn't savings to the hospital. This is avoided medical cost. Until we align the financial incentives, you can understand the complexity of a health system going all-in when they are not really all-in. We are doing the right thing for the world that we believe we will be in shortly."

Christopher Cheney

Christopher Cheney is the senior finance editor at HealthLeaders Media.

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