Medicare penalizes hospitals in effort to reduce the number of patients readmitted

September 23, 2013

Every hospital in the District and five in the Virginia suburbs will be penalized in the second round of Medicare’s campaign to reduce the number of patients readmitted to hospitals within a month, according to federal records.

Nationwide, Medicare identified 2,225 hospitals that will have their reimbursements for patient care reduced starting Oct. 1 because readmissions at each occurred more frequently than Medicare believes they should have. Hospitals that treated large proportions of low-income patients were more likely to be penalized than those treating the fewest low-income patients.

The penalty program, which was mandated in the federal health law and began in October 2012, is among the toughest of Medicare’s efforts to pay hospitals for the quality of their performances rather than merely the number of patients they treat.

Medicare has credited the penalty program with combating a perverse financial incentive: Hospitals can wind up getting paid for two stays instead of one if patients don’t recuperate after discharge.

Nearly 18 percent of Medicare inpatients end up back in the hospital within a month, and the Medicare Payment Advisory Commission (MedPAC) estimates that two of every three readmissions were for theoretically preventable reasons. Averting a tenth of those returns could save Medicare $1 billion annually, MedPAC says.

The penalties are based on readmissions of Medicare patients who went into the hospital with at least one of three conditions — heart attack, heart failure and pneumonia — and were discharged between July 2009 and June 2012. Those who ended up in any hospital within the next 30 days were counted unless that readmission had been planned. Hospitals that had more readmissions than Medicare predicted after taking into account the severity of their patients’ illness received fines.

While the overall number of penalized hospitals stayed about the same from the first round to the second, there will be considerable shifts among facilities.

A Kaiser Health News analysis found that 1,371 hospitals nationwide are receiving a lower fine than before. The penalty for Howard University Hospital, for example, will drop from 0.95 percent to 0.76 percent. Although it remains the most heavily penalized hospital in the region, Howard credited new technologies and programs for its progress.

Some fines go down

Medicare is reducing the fines for four other District hospitals, but United Medical Center in Southeast will have a higher penalty and Sibley Memorial Hospital, which is not now being penalized, will be fined in the new round because too many pneumonia patients were readmitted, records show.

The penalty for MedStar Washington Hospital Center will drop from 0.77 percent to 0.26 percent, the largest decrease in the region. Janis Orlowski, the hospital’s chief medical officer, said nurses now locate primary-care doctors for departing patients who do not have one. “We found if a patient . . . saw that person within seven days of discharge, their likelihood of being readmitted went down substantially,” she said.

Inova Health System’s Fairfax and Mount Vernon hospitals will be getting lower fines, but the penalties are increasing at its Loudoun and Fair Oaks hospitals. “The changes are relatively small,” said Loring Flint, Inova’s chief medical officer.

Inova Alexandria Hospital, currently receiving fines, will not be penalized in the second round. Flint said Inova has opened new clinics in Fairfax and Loudoun for patients who cannot otherwise get to a primary-care physician shortly after discharge, and it plans to open another in Alexandria. Also coming off the penalty list is Sentara Northern Virginia Medical Center in Woodbridge.

Maryland, which has a unique reimbursement system, is exempt from the penalty system. As a result, it is the only state without a hospital that is getting a fine.

Nationwide, 1,154 hospitals — about one in three that Medicare evaluated — kept readmission rates low enough to escape fines. Those included Prince William Medical Center in Manassas and Virginia Hospital Center in Arlington.

As they did last year, the penalties appeared to land harder on hospitals that treat large numbers of poor people, according to calculations by Medicare included in a regulation published in August. Among the so-called safety-net hospitals with the most poor patients, 77 percent were penalized, while only 36 percent of the hospitals with the fewest poor patients were penalized.

However, Medicare stated that it did not see a need to take the socioeconomic populations of hospitals into account in imposing penalties. “We routinely monitor the impact of socioeconomic status on hospitals’ results and have consistently found that hospitals that care for large proportions of patients of low socioeconomic status are capable of performing well on our measures,” the agency wrote in its rule.

The uneven impact of the penalties has been a major concern for hospitals. Low-income patients often have a harder time adhering to their post-hospital instructions, researchers say. Buying medicines can be prohibitively expensive for them and discharge instructions can be hard to follow.

This article was produced by Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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