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10 Things We Don't Know About Looming Readmission Penalties

 |  By cclark@healthleadersmedia.com  
   March 29, 2012

The second, and some say the most anxiously anticipated, document setting forth how hospitals with excessive 30-day readmission rates will be fined will soon be released.

A lot of money is at stake for some hospitals.

Beginning October 1st, the Affordable Care Act calls for penalties up to 1% of a hospital's entire base Medicare DRG payments in the first year, up to 2% the following year, and up to 3% every year after that.

The Centers for Medicare & Medicaid Services released the first installment of this new program's details in August 2011 with the final rules by which it would pay hospitals in FY2012. In that inpatient prospective payment system document, CMS promised further clarification with the FY2013 IPPS rule expected next month.

But precisely how these new rules will be implemented for three conditions that represent 16% of overall readmissions—heart failure, pneumonia, and acute myocardial infarction—remains unclear. Hospital officials are scratching their heads over how CMS will define, weigh, adjust, exclude, and compare hospitals, and how much money will be taken away.

Here are the most pressing issues hospital leaders hope CMS will answer soon:

1. How will hospitals be compared?
Hospitals with greater than expected risk adjusted readmission rates between July 1, 2008 and June 30, 2011 will be penalized in the first round.

But what groups of hospitals would constitute a fair comparison? Or those within a similar region or state or similar size? Or those with similar patient populations such as safety net or rural hospitals? Or will each hospital be measured with all others across the country?

This is important because there are vast regional differences in readmission rates across the country, according to CMS's Medicare Hospital Quality Chartbook for 2011.

CMS has indicated it intends to compare every hospital's readmission rates with the rest of the nation's, but some hospital officials hope for reconsideration.

2. Will CMS adjust for hospital size or socioeconomic status?
The risk adjustment formula to-date adjusts for some disease co-morbidities such as age, but does not correct for hospitals with patients who are more likely to be low-income, poorly educated, or have little access to primary care physicians, pharmacies and healthy food. It does not take into account race.

Some hospital leaders have argued vociferously that the formula is therefore biased against hospitals grappling with tougher populations.

In its FY 2012 rule last August, CMS explained it would not adjust for such factors as English language proficiency or socioeconomic status, saying that poorer scores could be due to "differences in the quality of healthcare received by groups of patients with varying race/language and socioeconomic status."

If there were such a correction, poor quality care for patients in "certain racial and ethnic groups may be obscured," the agency said, and "may suggest that hospitals with a high proportion of minority patients are held to a different standard of quality than hospitals treating fewer minority patients."

Nancy Foster, Vice President for Quality and Patient Safety Policy for the American Hospital Association, says many hospitals strongly disagree.

"What we're assessing here is supposed to be the performance of the hospital in doing what it can to prevent readmission. And when you confound that by not adjusting for community factors, then what you end up doing is penalizing hospitals for things that are clearly outside their control.

"I would agree that if we were assessing the impact of low socioeconomic status or communities without adequate primary care physicians, we want to hold that up and make sure that our measures doesn't adjust for that, but that's not what we're assessing here. We are supposed to simply be assessing hospital performance."

CMS promises to keep an open mind, and "will monitor" whether the program "has a disparate impact on hospitals that care for large numbers of disadvantaged patients. If such an impact is found, we will consider whether additional program modifications would be appropriate."

3. What is the "index hospitalization"?
What is the definition of the index hospitalization that starts the 30-day clock ticking?

Foster asks, "Is it the first one you come across in a year? Or, is it an admission to a critical access hospital that then warrants further admission to a general acute care hospital? Those are the sorts of questions we hope they'll answer."

4.  What unrelated readmissions might be excluded?
In general, CMS will impose a penalty if a hospital has greater-than-expected risk-adjusted readmissions regardless of the reason for the readmission. If a heart attack patient falls at home after discharge and must be readmitted, perhaps the hospital might have first inspected the home for a fall risk.

However, some readmissions could be justifiably unrelated, and even typically required as a standard of care. 

So far, however, CMS has noted it would not count as a readmission the case of a heart attack patient who is subsequently scheduled for a heart bypass procedure within 30 days, since that would be a typical occurrence.

However, CMS has not named any "typically scheduled" exclusions for pneumonia or a heart failure. But neither has it closed the door on the possibility.

5.  How much will Medicare save?
The law will result in gradually increasing savings to the Medicare program, totaling $7.1 billion over the next seven years, according to the Congressional Budget Office.

But will penalized hospitals lose the maximum 1% of base DRG, or will there be thresholds, for example, .5%?

So far, Foster interprets the penalty as one that includes the hospital's number of risk-adjusted readmissions factored with its expected number and the hospital's base payment for that diagnosis, calculated with a complex formula set forth by the ACA.

However, CMS still must clarify terms in the formula, such as base operating DRG, ratio, and floor adjustment factors.

6. How will each condition be weighted?
Will readmission rates for each condition be weighted equally? The answer could be pivotal, because heart attack patients are much less likely to be readmitted than patients with heart failure or pneumonia and they incur readmission care costs that are one-fourth what is spent to treat heart failure or pneumonia readmissions, according to a 2007 Medicare Payment Advisory Commission (MedPAC) report.

CMS intends to clarify its definition of "aggregate payments for excess readmissions."

7. What is an "Applicable Hospital"?
CMS intends to define this term. For example, might an admission that results in a readmission to a cancer hospital be excluded? 

8.  What is the appeal process?
CMS is considering what aspects of readmission rates sent to hospitals for review prior to public release might be correctable, and will clarify its review and process.

9. What future conditions will be added?
Four additional diagnoses account for 11.7% of all preventable readmissions, about 133,000 a year, according to a 2007 MedPAC report. They are:

The ACA specifies these four categories and others the HHS secretary deems appropriate may be added by FY2015. CMS is expected to signal which ones top their list.

10. How will CMS prevent hospitals from gaming the system?
CMS acknowledges the possibility that some hospitals might try various tactics to avoid excess readmission penalties, such as changing diagnostic codes to avoid identifying patients with AMI, heart failure, pneumonia, "systematic shifting, diversion or delays in care," might put pressure on emergency room staff not to admit patients within the 30-day window.

And although CMS has promised to monitor such practices to "minimize any unintended consequences" it has not explained how frequently or with what tools it intends to do so.

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