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Medicare Penalties for Hospital Stays
Medicare pays for hospital stays, and then Medicare counts how many patients are readmitted within 30 days after the end of the initial hospital stay. If readmissions are above the national average, adjusted for patient mix, Medicare will charge the hospital a penalty:
Table A. Readmission Penalties, Paid by Hospitals, for Five Conditions
- "Heart Failure" or "Weak Heart" refers to weak pumping because of muscle deterioration, stiffness, leaking valves, etc. Medical terms for this include heart failure, congestive heart failure, cor pulmonale; or cardiomyopathy. It is not the same as a heart attack or heart stopping.
- Penalty for Knee/Hip Replacement is large ($265,000), since the operation is expensive, and readmissions are rare, so the multiplier is large.
- Penalties on first 3 lines have been paid since Oct 2012, based on readmissions back to 2008. Last 2 lines will be paid Oct 2014, based on readmissions back to 2010.
- US averages are adjusted for patient mix at each hospital, to level the playing field, but the adjustments have a very poor fit, explaining only 3-5% of the variation in readmissions.
- Sources and notes are in the math section
Find Your Local Hospital's Penalties
This site discusses different strategies for patients and hospitals to control their risks under these readmission penalties.
Because of these penalties, all hospitals try to be below average on readmissions, which makes the average get smaller. Medicare even has a goal of reducing readmissions nationally by 20% in 2013. Faced with moving targets, hospitals cannot afford these penalties, so they need to prevent as many readmissions as possible.
The American College of Surgeons has warned Medicare about "the potential that these hospitals will decrease their care for such patients, thereby creating an access issue."
Better treatment and followup might prevent readmissions, but are very hard. Therefore hospitals also limit care and promote hospice, comfort care (symptom relief or palliative care), and "do not resuscitate" (DNR) orders, so patients die at home and do not come back to the hospital.
- Medicare in 2009 endorsed "end-of-life/palliative care programs" to cut costs and increase bonuses to doctors and hospitals.
- A Congressional agency, MedPAC, in 2012 recommended "hospice use and the presence of advance directives" to reduce rehospitalizations.
- The Florida Hospital Association says one method they used to reduce readmissions 15% was "Evaluating the patient’s end-of-life care wishes" (p.8)
- Doctors and nurses "overestimate the risk of death," so they will limit care even among patients who have low risk of readmission and death.
These pervasive efforts, important to hospitals and life-threatening to patients, only save $1.5 billion per year (p.26), less than a third of a percent of the Medicare budget. There are better alternatives.
Medicare approves for payment both the initial admission and the readmission. When it fines the hospital years later, it implicitly reverses those approvals, and overrules the doctors who decided hospital care was medically necessary, without even looking at the charts. For example,
- After pneumonia, a patient may be readmitted for gastrointestinal disease or other reasons.
- After knee replacement, a patient may be readmitted because a child or dog bumps the knee out of kilter, or the patient gets severe flu, or other reasons.
If we want legitimate patients treated, how can we penalize their hospitals? Hospitals' rational response is to treat fewer. There are also incentives against treatment in some of the other ratings of hospitals.
The penalty is far worse than simply refusing coverage, as Medicare does with long nursing or hospital stays. When Medicare lacks coverage, people can plan with other insurance or their own money. But hospitals cannot accept other money for these readmissions, since
- Medicare pays at the time of treatment, and only later imposes the penalty, and
- People do not know about the readmission policy, so cannot plan around it
Congress is considering similar penalties for skilled nursing facilities (SNFs) which have above-average rehospitalizations. If adopted, a major result will be giving SNFs a strong incentive to decline admission to the frailest patients, who need them most.
Four research papers confirm that low readmissions mean more deaths.
Other research papers show faster deaths for patients with palliative care or "Do Not Resuscitate" (DNR) orders.
The general approach of penalizing readmissions derives from an old estimate that 76% are preventable. This was based on experimental software, not verified by reviewing actual cases and seeing what it would have taken to prevent readmissions. (MedPAC 6/07 pp.107-108)
Dr Ashish Jha, of Harvard's School of Public Health, told PBS, "If you look at, for instance, the U.S. News [and World Report] publishes its list of top 50 hospitals. Those hospitals tend to have very low infection rates, very low mortality rates, very low death rates. Guess what? They tend to have very high readmission rates, because they do such a good job of keeping their patients alive that many of them are readmitted."
Dr. Sunil Kripalani, of Vanderbilt University Medical Center told Fox News, "Among patients with heart failure, hospitals that have higher readmission rates actually have lower mortality rates. So, which would we rather have -- a hospital readmission or a death?"