5 Things You Should Know About the Medicare Hospital Readmissions Reduction Program

We recently blogged about a new study finding that nearly 60 percent of the variation in hospital readmission rates appears to be associated with where the hospital is located, rather than on the hospital’s performance .

That post prompted us to dig a little deeper into the Centers for Medicare and Medicaid Services (CMS) Hospital Readmissions Reduction Program (HRRP) to learn more about how it works, what sorts of metrics it uses, and whether it’s been effective in reducing hospital readmissions thus far. We found some very helpful documentation on the subject, including summariesFAQs, and tools. Here’s our take on the top 5 things you should know about the HRRP:

1. Why the HRRP exists and what it’s supposed to do:

The Affordable Care Act of 2010 required the Department of Health and Human Services to establish a readmission reduction program. This program, made effective October 1, 2012, was designed to provide incentives for hospitals to implement strategies to reduce the number of costly and unnecessary hospital readmissions. CMS defines a readmission in this context as “an admission to a subsection(d) hospital within 30 days of a discharge from the same or another subsection(d) hospital.” Subsection(d) hospitals, per the Social Security Act, include short term inpatient acute care hospitals excluding critical access, psychiatric, rehabilitation, long term care, children’s, and cancer hospitals.

Currently about 20% of Medicare patients are readmitted to a hospital within one month of discharge; CMS considers this number excessive and believes that readmissions are an indicator of quality of care, or lack thereof. The HRRP intends to provide an incentive for hospitals to decrease readmissions by coordinating transitions of care and increasing the quality of care provided to Medicare beneficiaries. The program is part of CMS’ goal to transition to value based purchasing. These incentives escalate penalties that decrease a hospital’s payments from all of its Medicare cases.

The program is intended to improve quality and lower costs for Medicare patients. It is meant to help ensure that hospitals discharge patients when they are fully prepared and safe for continued care at home or in a lower acuity setting.

2. Which payments HHRP affects and how:

At this time, only CMS payments for hospital services are affected; not for physician services.

All Medicare payments to an “affected” hospital will be reduced. A hospital’s readmission rate and the percent penalty, if applicable, were determined based on the frequency of Medicare readmissions within 30 days for acute myocardial infarction (AMI), congestive heart failure (CHF) and pneumonia for patients that were discharged in July, 2008 through June, 2011. The analysis was based on the principal diagnosis at discharge and certain exclusions: transfers to another acute care hospital, certain readmissions that are unrelated to the prior discharge, and certain planned readmissions for procedures related to the AMI measure. CMS says they will continue to look at other potential exclusions from the readmission penalty calculation.

If the rates of readmissions to a discharging, or other Inpatient Prospective Payment System (IPPS) hospital, were deemed excessive, the hospital’s IPPS payments were decreased up to 1% for all Medicare payments. CMS determined the “excess readmission ratios” for the three diagnoses or “measures” based on a National Quality Forum-endorsed methodology; the analysis process and methodology are complex and looked at three years of discharge data and at least 25 records for each condition. The excess readmission ratio includes adjustments for clinical factors such as patient demographic attributes, comorbidities, and patient “frailty.” Hospitals are compared with a national average readmission ratio that generally applies to a hospital’s patient population and the applicable condition. For hospitals that exceeded the average readmission ratio, a penalty was determined and is now being applied to Medicare payments.

The payment penalty beginning October, 2012 was as much as 1 percent of every Medicare payment for a hospital that was determined to have “excessive readmissions” for the three measures. CMS projected that 2,217 hospitals will be affected. In October, 2013, the penalty went up to 2 percent, and in October, 2014, it went up to 3 percent. In 2015 additional conditions/measures for the initial inpatient admission will be added to the current list of three and will likely include the MedPAC recommendations of chronic obstructive pulmonary disease (COPD), coronary artery bypass graft (CABG) percutaneous transluminal coronary angioplasty (PTCA) procedures, and other vascular procedures.

3: How unnecessary hospital admissions are identified:

The initial hospital inpatient admission for AMI, CHF, or pneumonia (the discharge from which starts the 30-day potential penalty clock) is termed the “index” admission.

The hospital inpatient readmission, which can be used to determine application of a penalty if the readmission occurs within 30 days of the index inpatient admission stay, can be for any cause–it does not have to be for the same cause as the index admission. There are two exceptions from a readmission penalty: 1) readmission for certain staged AMI procedures likely planned during the index hospital inpatient admission, and 2) same-day hospital inpatient readmissions for the same condition to the same hospital.

Any readmission penalty is applied against the hospital where the index hospital inpatient admission occurred, so the “index” inpatient admitting hospital is the one liable for the payment penalty.

4: What hospitals are doing to reduce readmissions:

As a result of the program, hospitals are implementing various strategies in an effort to decrease the rate of readmissions. Most focus on steps to increase coordination of care and communications between providers and patients. Improved discharge planning, education and follow-up for discharged patients are also seen as key factors.

Other efforts include increasing coordination with other providers and care settings to aid in safe patient transitions, coordination with community resources such as home health agencies, follow-up calls to patients to aid compliance, coordination between case managers and discharge planners to assess high-risk patients and plan around their needs, increased patient education, and the implementation of policies and procedures that notify physicians of their patients’ discharge and prompt follow-ups on test results and check-ins on patient progress.

5. How it’s going so far:

According to healthffairs.org:

Critics question the methodology for determining excess readmissions and computation of the penalty, such as which readmissions are excluded and how reliable risk-adjustment models can be. A major objection is that there is no adjustment for the socioeconomic status of patient populations. Critics point to a number of factors that contribute to higher readmission rates for the poor, such as language and cultural barriers to complying with discharge instructions, lack of resources to purchase medications, and fewer options for post-discharge care. CMS maintains that it does not adjust for race or socioeconomic factors because it does not want to hold hospitals to different standards for the outcomes of their patients with low socioeconomic status, and that adjusting for socioeconomic factors may mask potential disparities in care for the disadvantaged.

CMS notes that its monitoring of quality consistently shows evidence that many safety-net and teaching hospitals perform as well as or better than hospitals without substantial numbers of patients with low socioeconomic status. They also note that the fact that patients of low socioeconomic status tend to be sicker and have a greater number of health conditions is taken into account by the existing risk-adjustment methodology.

In its June 2013 Report to the Congress, MedPAC endorsed the continuation of the Readmissions Reduction Program but made a number of recommendations on technical adjustments to the HRRP methodology. Among the recommendations are a change in the computation of the penalty and a proposed method for adjusting readmission penalties for patients’ socioeconomic status. CMS has committed to continue tracking the issue of socioeconomic status.

Another concern of hospitals is the overall financial impact of the program on hospitals’ bottom lines. Employing effective readmission reduction strategies, such as having nurses follow up with patients after discharge, is expensive and unaffordable for many institutions, particularly safety-net institutions. Because Medicare does not provide any direct payment to hospitals for services that may help prevent readmissions, such as discharge planning and follow-up, the additional, unreimbursed costs of employing strategies to reduce readmissions, together with reduced revenues from fewer readmissions, raise doubts about how cost-effective it is for hospitals to try and avoid the penalties.

To be sure, CMS has made additional funding available for readmission reduction strategies through initiatives, such as the Community-based Care Transitions Program and the Partnership for Patients.