Medicare Announces Readmissions Penalties

Medicare will impose financial penalties in FY 2015 on the majority of U.S. hospitals for excessive patient readmissions.

In all, 2610 hospitals face penalties that range from one one-hundredth of one percent to three percent of all Medicare payments.  Last year, the maximum penalty was two percent.

iStock_000001497717XSmallThe majority of hospitals in 29 states will be penalized and 39 hospitals face the maximum penalty of three percent.  Overall, the penalties will amount to $428 million.  Many hospitals will be penalized even though they reduced their readmissions in the past year.

Medicare’s hospital readmissions reduction program was mandated by the Affordable Care Act in the belief that penalizing hospitals for what were considered avoidable readmissions would spur them to take steps to prevent such readmissions.  Readmissions cost Medicare $26 billion a year, of which $17 billion is considered unavoidable.

Concerns have been raised that the readmissions penalties are unfair to safety-net hospitals because they serve more low-income patients with more complex medical problems and who, after discharge, face financial and logistical challenges during their recovery that make them more likely to require readmission.  The National Association of Urban Hospitals has long been concerned about this bias and has supported legislation to add a risk-adjustment component to this program.

For a closer look at FY 2015’s readmissions penalties, including links to a file that lists individual hospital penalties nation-wide, see this Kaiser Health News report.

MedPAC Looks at Short Hospital Stays

At its public meeting last week, the Medicare Payment Advisory Commission (MedPAC) looked at challenges surrounding payments to providers for short hospital stays.
new medpacA presentation delivered by MedPAC’s staff looked at the profitability and growing frequency of one-night admissions; the impact of Recovery Audit Contractor (RAC audit) activities; Medicare beneficiary financial liabilities associated with observation stays; the controversial two-midnight rule; and possible ways to address these continuing problems.

MedPAC did not offer any formal recommendations during the meeting.

When the Centers for Medicare & Medicaid Services (CMS) proposed this year’s Medicare inpatient prospective payment system regulation in May, it invited interested parties to offer suggestions on how to address the short-stay issue.  In a letter that addressed a wide range of subjects, the National Association of Urban Hospitals (NAUH) offered the following recommendations on Medicare hospital short stay payment policy.

In NAUH’s view, a Medicare short stay begins with a physician’s initial diagnosis that a patient needs to be admitted to the hospital as an inpatient and is expected to remain at least two midnights or more.  Then, when the patient’s stay is ultimately shorter, NAUH believes that stay should be classified as a short stay for Medicare payment purposes.  A short stay should be reimbursed by Medicare based on Medicare transfer reimbursement policy – that is, for this day, Medicare should pay the hospital twice the per diem rate for the applicable DRG’s average length of stay.  This proposal is based on the generally accepted view that the greatest investment of resources for patient care occurs during the very beginning of a patient’s stay in the hospital and that even in a short stay, a hospital is expending comparable resources on patient care during that first day or two as it does when a patient stays longer.  This is the basis for current Medicare transfer payment policy and NAUH believes it should be the basis for Medicare short hospital stay payment policy as well.  Further, hospitals that serve large numbers of low-income patients and have medical education programs should not be put at a disadvantage when patients just have short stays, so NAUH further proposes that they receive Medicare DSH and medical education payments for these short stays as well.

NAUH’s entire letter to CMS can be found here.

See the MedPAC presentation “Hospital Short Stay Policy Issues” here.