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Medicare to Fine 2,225 Hospitals for Excess Readmissions

Payment reductions to start in October (August 2)

According to a report from the Kaiser Family Foundation, Medicare will impose $227 million in fines against hospitals in every state but one for the second round of the government’s campaign to reduce the number of patients readmitted within a month.

Medicare identified 2,225 hospitals that will have payments reduced for a year starting on October 1. Eighteen hospitals will lose 2%, the maximum possible and double the current top penalty. Another 154 will lose 1% or more of every payment for a patient stay. Hospitals that treated a large number of low-income patients were more likely to be penalized than those treating the fewest impoverished people.

The penalty program, which began in October 2012, is among Medicare’s efforts to pay hospitals for the quality of their performances rather than the number of patients they treat. Unlike other new programs created by the federal health law, the readmissions program offers hospitals no rewards for improvements or the opportunity to opt out.

Medicare has credited the penalty program for combating a perverse financial incentive: hospitals earn more money if their patients’ health deteriorates after they are discharged, because they can be paid for two stays instead of one. The Medicare Payment Advisory Commission (MedPAC), which reports to Congress, has estimated that 12% of Medicare patients may be readmitted for potentially avoidable reasons. It has been estimated that averting one out of every 10 of those returns could save Medicare $1 billion.

Source: Kaiser Family Foundation; August 2, 2013.

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