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The Medicare 1% Holdback, What It Means To The Industry

The Medicare 1% Holdback, What It Means To The Industry

The Affordable Care Act (ACA) has been widely discussed, and yet some provisions are not widely known to the public. One provision that has been controversial in the medical community is the Hospital Value-Based Purchasing Program. This program calls for the withholding of one percent of all Medicare payments to acute care hospitals over the course of a year. The money that is withheld, estimated to be near $850 million, will then be paid out to high performing hospitals. The decision regarding which hospitals are high performing will be made based upon performance measured against a set of standard clinical quality measurements. Patients’ surveys will also be considered in the determination of which hospitals receive the bonus payments.

The purpose of this provision of the ACA is to give an incentive to hospitals to improve upon the quality of care provided to their patients. A second provision in the Affordable Care Act targets readmissions, initially for acute myocardial infarctions, congestive heart failure, and pneumonia after a hospital stay. Hospitals with high readmission rates are penalized up to 1% of Medicare reimbursements. Doctors who readmit patients within 30 days of discharge are at risk of receiving no payment from CMS for additional in-hospital treatment. Hospitals do receive extra funds for the coordination of patient care after discharge to help preclude readmissions. Some of these funds are set aside to finance Affordable Care Organizations.

A study by Health Affairs estimates that if value-based purchasing were based upon the data available from 2009, more than two-thirds of hospitals would have been affected, although the effect would have averaged less than one percent. The Value-Based Purchasing Program has drawn less criticism, however, than the readmission provision.

There are many factors that contribute to a patient’s readmission to the hospital, and the hospital and physician are unable to control all of these factors. Some of the random variables include socio-economic factors such as poor compliance and lack of education, which may result in patient readmission through no fault of the attending physician or hospital. As a result, hospitals that operate in underserved rural or urban areas may have skewed results as a result of the challenge of treating a population that is already at risk. Teaching hospitals are expected to be exceptionally burdened by this provision of the ACA, since they often serve a population that is at risk for health problems and has few resources to call upon as outpatients.

Medication changes may be made in the hospital, without communicating the changes to the patient’s physician. Additionally, patients may fail to follow up with their physician as directed. Hospitals are exploring multiple options to see that these problems are resolved.

Just as admission rates can be reduced, readmission rates can be reduced by improved ambulatory care, effective treatment, and patient cooperation. Hospitals began preparing for the implementation of these rules in 2011. Part of their effort includes the improvement of communication between the hospital and the physician, as well as communication with rehabilitation centers and with the patients themselves. Under the new law, penalties will gradually increase to 3% of the hospitals’ Medicare payments.

Since the implementation of the readmission rule, the national rate of hospital readmissions of Medicare patients within 30 days of discharge, has dropped to 17.8%, after remaining at approximately 19% for the previous five years. In 2012, Medicare expanded its spending by only 0.4% per beneficiary, compared with an average rate of 1.9% in the previous three years. It is not clear that the drop in Medicare spending is related to the readmission penalties, since they went into effect only last fall. However, Jonathan Blum, a senior official at the Centers for Medicare and Medicaid Services, believes the drop in readmissions is due to the provisions in the Affordable Care Act for readmission penalties. Readmission rates at the 80th percentile or lower are considered optimal by the Centers for Medicare and Medicaid Services.

Education and provision for aftercare, with close follow-up, usually contribute to low rates of readmission. With the additional funding provided by the government, new patient care networks are being developed to provide close follow up after discharge.

In a study published in the Journal of the American Medical Association in January of this year, researchers studied Medicare readmissions for three common diagnoses. Readmission rates for heart failure during the study period, from 2007-2009, were high, with the readmission diagnosis most commonly being heart failure. In fact, after heart failure hospitalization and discharge, readmissions were significant at 24.8%. Of the readmitted patients, 87.5% were readmitted once, 9.7% were readmitted twice, and 2.8% were readmitted three or more times.

There is no question that patients are sometimes discharged without fully understanding their discharge instructions, and in some cases they simply ignore them. There must be a balanced consideration of these chronic problems, which recognizes the patient factor in hospital readmission. Some observers have wondered whether hospitals will begin to pass the cost of these penalties to hospital employees, specifically hospitalists. And yet, a hospitalist may have done everything right, only to be stymied by the actions or inaction of the patient after discharge.

There is also speculation that hospitals and physicians will weed out high-risk patients. This will effectively result in rationing healthcare. Another possibility is that cost will be shifted as patients are discharged to long-term acute care hospitals or rehab facilities instead of being discharged to home, where they may not comply with treatment recommendations.

In an effort to reduce duration of hospital stays, planning by a discharge coordinator, a non-physician, often begins on day one of a hospital stay. Doctors face a dilemma—when they try to do the right thing and hold off on discharging patients until they have shown themselves to be stable on their new medication regimen, they face pressure from the hospital to speed up the discharge. If the doctor complies with a quick discharge, there is a greater risk that a readmission may be necessary for which the doctor may be penalized.

The other two diagnoses considered in this study were readmissions after acute myocardial infarction and after pneumonia. The readmission rates in these cases were 19.9% and 18.3% respectively. With close follow up, access to medication, and education, hospitals are hopeful that they will be able to continue to significantly reduce readmission rates.

Some doctors have said they are being asked by their hospital administration to avoid admitting patients with the three diagnoses being tracked by CMS. For example, instead of a diagnosis of pneumonia, the physicians have been asked to diagnose fever, cough, tracheobronchitis, or even leukocytosis. Conceivably, hospitals could deny privileges to physicians with too many readmissions.

Physicians feel they should neither be asked to misrepresent diagnoses nor short-change patient care to ensure profitability when caring for chronically ill. Unless some adjustments are made, there is a great concern that these rules and penalties could result in driving physicians from the field and hospital closings in challenged areas.

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