MA Hospitals Cry Foul Over State Readmission Fines

Massachusetts hospitals are vehemently objecting to a state policy poised to impose fines of 2.2% of Medicaid payments on 24 facilities said to have higher than average rates of readmissions.

According to the Massachusetts Hospital Association, the penalty provisions, set to become effective Oct. 1, are "an unsound and arbitrarily designed policy" that "appears to be based on the simplistic and flawed premise that preventable readmissions are caused principally by hospitals," rather than patients, their families or by other providers, said Timothy Gens, MHA vice president and general counsel.

He made his remarks in a nine-page letter Sept. 14 to state Medicaid Director Julian Harris.

State officials believe the fines will save the state $5.2 million in the first year. Massachusetts is believed to be the second state to impose such penalties for higher Medicaid readmissions, subsequent to the adoption of a similar policy by the state of New York earlier this year.

Gens made clear in an interview Friday that MHA's members do not object to having a program that addresses readmissions, because "almost every hospital in the state is involved in some initiative or collaboration." 

Rather, they object to the state Medicaid agency's selection of the 3M Potentially Preventable Readmission system to determine those rates, a formula that he says was rejected by the National Quality Forum and the state's Health Care Quality & Cost Council's Expert Panel on Performance Measurement.

Gens says that MHA members also object because the names of the hospitals with allegedly higher readmission rates were released without allowing "time for them to look at this data and see if it is correct. Some hospitals have already said that it is not correct."

David Smith, MHA's senior director for health data analysis and research, said in a telephone interview on Friday that MHA objects to this method because it "eliminates the possibility that bad luck or random chance could have put the institution above average in readmissions."

On the Centers for Medicare & Medicaid Services website, HospitalCompare, hospitals with higher rates of readmission are identified as having higher or lower rates of readmission, but only 292 hospitals are put in the "worse than national average" category out of more than 4,500 facilities. Many facilities with higher rates of readmission than average are not included unless their rates are at the extreme end.

With the Massachusetts formula, about 33% of the hospitals, rather than 6% of Medicare hospitals, is tapped for a penalty.

"Anyone who is above average is deemed to have excess readmissions," Smith said. "For example, they might say that based on your case mix, you would have 150 readmissions. Well, if you had 151, then you get the penalty."

Smith added that another objection is that "it essentially treats admissions as if the hospital is entirely responsible for them. That's clearly not the case. There are many things that can happen following the discharge that have nothing to do with the care the patient received.

It might be something that occurred in the care of another provider, or it might have something to do with the patient, through no cause of their own, or they didn't comply with care requirements, whether it was their diet or they failed to take a certain drug."

Smith emphasizes that the MHA "is not saying that hospitals can't reduce readmissions. What we're saying is that we need a more discriminating way of looking at this."

"It is therefore inexplicable and inexcusable for MassHealth to ignore the opinion of experts and to proceed with its potentially preventable readmission policy," the letter to Harris said.

Gens emphasized that many hospitals in the state are suffering already. "We've had two hospitals file for bankruptcy this summer, and there are others with no margin or a negative margin." Medicaid already pays hospitals 71 cents and Medicare 92 cents for every $1 of care, and hospitals are being asked to take on huge expenses to implement electronic health record systems

The state has imposed rate payment reductions in FY 2009 and 2010 affecting inpatient and outpatient care, medical education funding, pay for performance funds, and reductions in extra pay for adult inpatient outlier cases.

The MHA said in its letter that it recognizes MassHealth has cost pressures from increased enrollment and utilization, "we believe that commonwealth must end its practice of balancing the MassHealth budget on the backs of hospitals.

"Otherwise, the unfunded expenses of caring for MassHealth patients will result in further reductions in workforce and a deterioration of hospital plant equipment and systems. The cost-shift onto the private sector by hospitals (at least those that are able to) will also continue, forever challenging our state’s effort to successfully reform the payment and delivery system.

The federal government plans to reduce payment to hospitals that have 30-day readmissions in the highest quartile by 1% of their Medicare payments, with discharges as of Oct. 1, 2012.

Representatives of several of the hospitals listed for fines said they could not comment, and some said they weren't aware they were named. They all referred inquiries to the MHA.

As reported by the Boston Globe, the 24 hospitals to be fined are Anna Jaques Hospital, Beth Israel Deaconess Hospital Needham, Boston Medical Center, Brigham & Women's Hospital, Brockton Hospital, Cambridge Health Alliance, Caritas Good Samaritan Medical Center, Caritas Healthcare Norwood Hospital, Heywood Hospital, Marlborough Hospital, MetroWest Medical Center, Milton Medical Center, Morton Hospital and Medical Center, Nashoba Valley Medical Center, Noble Hospital, Quincy Medical Center, North Adams Regional Hospital, Saint Vincent Hospital, South Shore Hospital, Sturdy Memorial Hospital, St. Anne's Hospital, St. Elizabeth Medical Center, Southcoast Tobey Hospital, and Tufts New England Medical Center.