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Medicare Fines 2,610 Hospitals in Third Round of Readmission Penalties

About 2 million patients return each year

According to Kaiser Health News (KHN), Medicare is fining a record number of hospitals — 2,610 — for having too many patients return within 1 month for additional treatments. Even though the nation’s readmission rate is dropping, Medicare’s average fines will be higher, with 39 hospitals receiving the largest penalty allowed, including the nation’s oldest hospital, Pennsylvania Hospital in Philadelphia.

The federal government’s penalties, which begin their third year this month, are intended to jolt hospitals to pay attention to what happens to their patients after they leave.

Around the country, many hospitals are replacing perfunctory discharge plans — such as giving patients paper instructions — with more active efforts, such as ensuring that outside doctors monitor their recoveries and giving supplies of medication to patients who may not be able to afford them. Other hospitals are still struggling to meet the new expectations. Before the program, some hospitals resisted such efforts because they weren’t paid for the services, and, in fact, benefited financially when a patient returned.

Last year, nearly 18% of Medicare patients who had been hospitalized were readmitted within 1 month. While that is lower than past years, approximately 2 million patients return each year, costing Medicare $26 billion. Officials estimate that $17 billion of that comes from potentially avoidable readmissions.

Under the new fines, three-quarters of hospitals that are subject to the Hospital Readmissions Reduction Program are being penalized. That means that from October 1 through next September 30, they will receive lower payments for every Medicare patient stay — not just for those patients who are readmitted. Over the course of the year, the fines will total about $428 million, Medicare estimates.

More than 1,400 hospitals are exempted from the penalties, including certain cancer hospitals and critical-access hospitals, as well as facilities dedicated to specific services, such as psychiatry or rehabilitation. Maryland hospitals are also excluded because the state has a unique payment arrangement with Medicare. The fines are based on readmissions from July 2010 through June 2013.

In New Jersey, every hospital but one will lose money this year. So will most hospitals in 28 other states, including California, Florida, Georgia, Illinois, Massachusetts, New York, Ohio, Pennsylvania, Tennessee, and Texas, as well as the District of Columbia, according to a KHN analysis of the penalties.

While some penalties are as small as a hundredth of a percent, hospitals with the highest readmission rates are losing 3% of each payment — an increase from a maximum punishment of 2% last year. The increase brings the top penalties to the full force authorized by the Patient Protection and Affordable Care Act (PPACA).

The 39 hospitals where payments will be reduced by 3% percent include a number of specialty surgical hospitals, small community hospitals, and the Pennsylvania Hospital, a major teaching facility, founded in 1751 by Benjamin Franklin and Dr. Thomas Bond.

Another 496 hospitals will lose 1% or more of their Medicare payments. Those facilities include Northwestern Memorial Hospital and Rush University Medical Center in Chicago, Beth Israel Medical Center in Manhattan, Tufts Medical Center in Boston, and a few satellite hospitals owned by well-respected systems, including the Mayo Clinic and the Geisinger Health System.

Medicare levied penalties against 433 more hospitals than it did last year. The average penalty this year is 0.63%, up from 0.38% last year, according to the KHN analysis.

One reason for the higher and more widespread fines is that this year Medicare began evaluating readmissions in two new categories of patients — those initially admitted for elective knee or hip replacements, and those with lung ailments, such as chronic bronchitis. Those patients were assessed along with the heart failure, heart attack, and pneumonia patients that Medicare has examined since the penalties began in October 2012.

A key concern about the program is that safety-net hospitals that treat large numbers of low-income patients have been more likely to receive penalties, partly because poor patients face financial and logistical challenges that make them more likely to get sicker after discharge than others, even if the hospital is trying to oversee their recuperations.

Much of the formula that calculates the fines was written into the PPACA, and Medicare has maintained that it cannot unilaterally change it. The Medicare Payment Advisory Commission, which makes recommendations to Congress, has urged that the government compare hospitals with similar ones — academic medical centers to each other, for instance — when assessing penalties.

Source: Kaiser Health News; October 3, 2014.

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