Globe1234
  • HOME
  • Specialists
  • Medicare
  • Salt etc.
  • More

Sources and Math Underlying the Penalties

10/30/2020

6 Comments

 
Table A. Readmission Penalties, Paid by Hospitals, for Six Conditions
HF $35,000, Attack $56,000, Pneu $45,000, COPD $33,000, Knee/hip $285,000
Column A. Each "Penalty" is the cost of Initial Treatment in Column B multiplied by the US ratio of admissions to readmissions (Column D). 
  1. A Congressional agency, MedPAC, confirms that the penalty per excess readmission [Col A]= "Payment rate for the initial DRG [Col B] ... ×  [Col D] 1 / national readmission rate for the condition" (p.99). 
  2. The law and Medicare's explanation have more complex wording, but are equivalent to this multiplication. An example is in this spreadsheet.
  3. Congress told Medicare how much to penalize hospitals which have "excess" readmissions, and told Medicare to decide which treatments would face penalties. Medicare chose to apply penalties to the conditions in Table A (see timing). "Excess" readmissions means above the US average, adjusted for patient mix. 

Column B. The "Average Base Payment" is an average of Medicare's detailed payments, by diagnosis from October 2014 to September 2015 (FY 2015). There are different payment levels for patients with and without other unrelated illnesses, and the average payment here is weighted by the number of patients having each payment level.

Column C. "US Average Readmissions" above were updated in Hospital Compare 26 July 2017. 
  1. Unscheduled readmissions of Medicare patients, for almost any reason at most Medicare and VA hospitals count in the readmission rate of the hospital where the initial visit happened.
  2. Penalties are only charged at hospitals with 25 or more admissions for a condition
  3. Some types of admissions are excluded, which exempts them from penalties.

Column D. "US Ratio of Admit to Readmit" is one divided by Column C.
  1. American Hospital Association thinks penalties are so large that using Admit as the numerator must be a "technical error" (p.4), but they agree that is what the law says. 

Column E. "Each Condition" is the total of Medicare's counts of admissions, by diagnosis

Note F. Medicare does not provide as much detail as this table, but its data support an estimate of $52,000 average penalty per excess readmission in 2016,
$36,000 in 2014 and $40,000 in 2013:
  1. $227 million total penalties in 2014, divided by 6,300 excess readmissions per year, since there were 18,902 total penalties in the 3 base years they show
  2. $280 million total penalties in 2013, divided by 7,000 excess readmissions per year--20,947 in 3 years shown
  3. Difference  between 2013 and 2014 is budget inaccuracy, not real change
  4. $420 million total penalties in FY2016 (p.2064), divided by 8,051 excess readmissions per year -- 24,153 in 3 years shown (at 2,666 hospitals, p.2064)

Note G. Medicare adjusts readmission rates 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.

Note H. MedPAC looked at the multipliers (shown in Column D), and recommended the law should change to: 
  1. Make all the multipliers 1, not 4 to 21, so each penalty would be smaller, but 
  2. Set the standard at fewer readmissions than the national average.
  3. If MedPAC's recommendation is adopted, more hospitals and more readmissions would be penalized, and total penalties would be the same (p.101). 
  4. With Congress polarized on the healthcare law, amendments seem unlikely.
Note I. Medicare has an interesting map of readmission rates by county and race. Choose readmissions under "measure."
​Note J. Penalties for each hospital depend on constants in Table 1, and factors for each hospital in the Impact file each year.
6 Comments
Matt Erickson
7/1/2014 04:19:25 am

Hey! Great work here ... I have been trying to figure this out for a few days and had a question. Do you have a reference for what DRG's you picked to be related to AMI, PN, and HF? For instance your sample calculations spreadsheet lists 193, 194 and 195 as the DRGs related to PN? I can't find where CMS published that ... just trying to work out the math. Thanks!

Reply
paul link
7/1/2014 07:29:59 am

Medicare defines the conditions subject to penalties by ICD-9-CM codes in the Federal Register. For $700 they sell a database which groups these into DRG codes. Medicare labels all DRG codes in "Table 5-List of Medicare Severity Diagnosis-Related Groups (MS-DRGs)" which they distribute with the same Federal Register notice. So I treat these DRG labels as consistent with the Federal Register notice, and use the DRGs labeled for COPD, Pneumonia, etc. Thanks to your question I added this explanation to the spreadsheet.

federalregister.gov/articles/2014/05/15/2014-10067/medicare-program-hospital-inpatient-prospective-payment-systems-for-acute-care-hospitals-and-the#t-45

ntis.gov/products/grouper.aspx

cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2015-IPPS-Proposed-Rule-Home-Page-Items/FY2015-IPPS-Proposed-Rule-Tables.html

Reply
Matt
7/3/2014 01:13:20 am

Thanks for the response! That makes sense ... once I reviewed all the DRGs it makes sense as to which ones applied. Do you know if CMS sells (in that $700 data set or others?) the reimbursement amounts to providers by DRG or in total? I have seen data sets similar but never exactly what I want ... for instance I have average reimbursement and number of cases ... but not sure if that can be multiplied to actual reimbursement.

paul link
7/3/2014 04:15:12 am

I think multiplying average times number of cases would work. A detailed explanation of payments is in

globe1234.info/medicare/category/payments

Ray Kalinsky link
9/16/2014 05:19:23 am

Recently the question has come up as to how Medicare and the Hospitals will record or keep track of their re-hospitalizations when it comes to dates. I have seen it done two ways and was wondering if you know how Medicare looks at it. The two ways are basically to record the 30 day re-hospitalization based on the date it occurs, or do you record a 30 day re-hospitalization going back to the day the patient was admitted? Any Thoughts?
Thanks,

Reply
Hossein
11/21/2017 11:37:32 am

Thank you for the very usefull and easy-to-go calculations. Did you calculate 2013 and 2014? The excel file only provides 2015-2017. Also do you have the "Readmission penalties are based on operating cost+new technology+transfers without the other adjustments. Operating as % of "average" i.e. operating plus capital, teaching, disproportionate share and outlier payments:", as I see 73% reported for 2017.
Thank you,
Hossein

Reply



Leave a Reply.

    This site does not provide
    legal or medical advice.

    The site does not
    recommend doctors,
    hospitals or anyone. It
    summarizes information,
    mostly from Medicare, so
    you can decide.


    Dates are assigned
    arbitrarily to sort
    the articles.
     Most
    articles have been
    written or updated
    more recently.


    Like: Facebook, Twitter,
    Google+1
    , Reddit

    Pages

    All
    0verview
    1-updates
    About
    Accountable Care Org
    Aco
    Advance Directives
    Advocates
    Alternatives
    App
    Assisted Living
    Boards
    Citations
    Climate
    Comfort Care
    Comment To Medicare
    Concierge
    Contact
    Correlations
    Costs
    Courts
    Data
    Deaths
    Definitions
    Dentists
    Disaster
    Doctors
    Do Not Resuscitate
    Drug Interactions
    Drugs
    Ehr
    Electronic-records
    Emergency
    Ethics-guidance
    Excel
    Exclusions
    Financial
    Foia
    Foreign
    Fragile
    Hac
    Heart Failure
    Home Visits
    Hospice
    Hospital Data
    Hospital Lists
    Hospital Strategies
    Incentives
    IQR
    Kidney
    Lawyers
    Life-expectancy
    Literacy
    Living Will
    Luxury
    Math
    Medical Devices
    Medicare Advantage
    Medicare Data
    Medicare Texts
    Medicare-texts
    Medpac
    Minorities
    Nursing Homes
    Odds
    Overview
    Pain
    Palliative Care
    Part C
    Patient Strategies
    Payments
    Penalties
    Penalty Percent
    Premiums
    Preparedness
    Prescriptions
    Prices
    Privacy Policy
    Public Comment
    Quality
    Readability
    Readmissions
    Reducing Costs
    Referral
    Representative
    Research
    Short Comments
    Sources
    Statistics
    Submissions
    Subsidies
    Telehealth
    Timing Of Penalties
    Tourism
    Vbp
    Waivers

    RSS Feed

Picture
  • HOME
  • Specialists
  • Medicare
  • Salt etc.
  • More