Time To Get Serious About Hospital Readmissions
Monday, October 1, marked a date hospitals knew was coming since March 2010: the beginning of federal fiscal year (FY) 2013, and the initiation of the CMS Readmission Reduction Program.
The Readmission Reduction Program, referred to more commonly as the “readmission penalty,” has been a looming threat to hospitals for the past 18 months. But that’s been a long and uncertain 18 months. When the penalty program was legislated in Section 3025 of the Affordable Care Act, the details were still to be determined, and it was not until August 1, 2012 that CMS issued the final rule containing details of how the penalty would be calculated.
In the interim, concerns raised by the American Hospital Association regarding the appropriateness of the CMS methodology for measuring readmissions — specifically the lack of adjustment for safety net hospitals who serve economically disadvantaged populations — gave some hospitals a sense that the penalties as described in Section 3025 and subsequently communicated via Hospital Specific Reports (HSRs) would be somehow modified. Read: watered down. Additionally, the 2012 Supreme Court challenge to the constitutionality of the Affordable Care Act also created uncertainty among hospital executives regarding whether all or part of the ACA would be law come October 1, 2012.
And so, last week, when the penalties rolled out as previously announced and consistent with the original concept, readmissions topped the agenda of hospital executive team meetings across the nation.
In total, 2,217 hospitals will be assessed a penalty ranging from 0.01 percent to 1 percent of their Medicare revenue in FY ’13. The magnitude of the penalty is determined by a calculation of an excess readmission ratio based on 30-day readmission rates for heart attack, heart failure and pneumonia. This “excess readmission ratio” is an adjustment factor that will be applied to each diagnosis-related group (DRG) reimbursement for FY ’13, and in that way reduce the total Medicare revenue for the organization. The average total annual penalty nationally is reported to be in the low six figures, while large hospitals subject to the maximum 1 percent will see close to a seven-figure revenue impact. The sum of the penalties assessed nationally approximates $280 million.