Hospital Strategies

How Hospitals Can Manage Risk

Each penalty is much larger than the money earned from initially treating the patient. Caring for any Medicare patient frail enough to have a large readmission risk has become financially risky and an act of charity. Medicare even offers software to show which patients have high readmission risk, so hospitals can be very aware of them. In advising Medicare patients, Medicare now wants hospitals to consider financial risk to themselves, as well as medical risk to patients.

Hospitals can in theory address their risks with Medicare patients by: (A) improving care, (B) taking the riskiest patients out of the statistics system, or (C) serving more low risk patients.

(A) Improving care has several aspects:

• Inside their walls, hospitals have always provided care as well as they know how. Continuous improvement is always good, but usually limited, and often expensive.
• Outside their walls, hospitals have little role in the best ways to improve care, such as better patient compliance, frequent monitoring, adjustment of medications after discharge, diet, exercise. These are the role of outpatient doctors and general public education. Hospitals can encourage and provide reminders and feedback. A patient survey used at 120 hospitals covers very rudimentary matters, showing hospitals' limits.
• During discharge, hospitals can send patients to nursing homes rather than home, at higher cost to Medicare and/or the patients. If this redirection cuts readmissions, hospitals may pursue it regardless of cost to Medicare, or whether being home could benefit more patients. And hospitals do need to choose the most helpful nursing homes. The Advisory Board (a consultant group) is one of many places with discharge advice.
• Ignoring Medicare incentives. Following them uses skilled staff time, and Medicare is so focused on cost that the budget will be cut no matter what the hospital does.
• Telling patients about readmission penalties, to convince patients that the first 30 days after discharge have real risk of readmission, and motivate patients to work with health care providers to stay well

(B) Taking the riskiest patients out of the statistics can include:

• sending people home from the emergency room or into a long term hospital, rather than admitting them

• having patients for observation, rather than as inpatients, entailing higher patient costs than inpatient
• Medicare recommends advising patients and families to accept comfort care/symptom relief, and "do not resuscitate" (DNR), and hospice, so more patients die at home rather than coming back to the hospital

• advising postponement of treatment, hopefully to another hospital
• advising use of a Medicare Advantage plan (HMO or PPO; they do not face these penalties but have other cost limits)

• advising patients to drop Part B if they can get other insurance (penalties are based on patients with Parts A and B)
• not billing Medicare for frail patients for 30 days, absorbing the initial cost rather than the penalty

• reviewing the principal diagnosis for a complex patient to see if it can properly be an issue which is not one of the six categories subject to penalty (in Table A); however there is no tolerance for improper coding
  
• educating Congress to repeal or reduce the penalty

(C) Serving more low risk patients will not save Medicare money, but can save the hospital money. It can include:

• building relationships with referring doctors
• marketing, such as direct mail to hikers and runners, with ads for the hospital's skill at knee replacement, thus recruiting a generally healthy group to improve the hospital's readmission rates for knee replacement. HCA seems to do this.

Whenever medically defensible, the hospital would earn more by avoiding risky Medicare patients in the listed diagnoses, since serving these patients raises the number of readmissions. Hospitals have large financial penalties for readmissions, though not for deaths.

National Partnership for Women & Families noticed the incentive problem when the penalty was first enacted in 2010, "models like hospital readmission penalties may create perverse incentives for providers to reduce or avoid providing care to complex patients who could be less profitable under these models" (p.6).

Health providers who join an Accountable Care Organization (ACO) have further reason to promote symptom relief and minimize treatment. They gain from cost savings, lose from readmissions (p.10) and even from admissions (pp.12-13), and have no loss from death. Patients will not be well informed. A list of ACOs is here.

Too much penny-pinching in government health care leads to separate systems with unequal care: "in the General Hospital, the government pays Siloam [an Indonesian hospital chain] a capped price per patient for a given condition; in Lippo Village most patients pay for themselves" (Economist 17 May 2014)