Medicare penalties drop for high hospitalizations, but 2,300 benefits remain

The federal government has relaxed its annual penalty for hospitals with expected readmission rates in recognition of the havoc the Covid-19 pandemic has wreaked, resulting in the lightest penalty since 2014.

The Hospital Readmission Reduction Program has been a mainstay of Medicare’s hospital payment system since its inception in 2012. Created by the Affordable Care Act, the program evaluates the frequency with which most hospitals return Medicare patients within 30 days and lowers future payments to hospitals. had a greater-than-expected rate of return. Hospitals can lose up to 3% of each Medicare payment for a year.

The pandemic has thrown hospitals into disarray, flooding them with Covid patients and forcing many to postpone elective surgeries for months. While the Centers for Medicare and Medicaid Services evaluated the previous three years of hospital readmissions, as it does annually, the government decided to skip the first half of 2020 because of the pandemic chaos. CMS also excluded from its calculations Medicare patients who developed pneumonia over a three-year period due to difficulty distinguishing them from Covid patients.

Akin Demehin, senior director of quality and patient safety policy at the American Hospital Association, said the changes were warranted. “The Covid pandemic has done a really unprecedented amount for hospital patterns of care,” he said.

After making these changes, CMS evaluated 2½-year readmission cases for Medicare patients who had heart failure, heart attack, chronic obstructive pulmonary disease, coronary artery bypass grafts, and knee and hip replacements. As a result of its analysis, CMS penalized 2,273 hospitals, the fewest since the fiscal year that ended in September 2014, a KHN analysis found.

The average payment decline was 0.43%, the lowest since 2014. The reductions will be applied to every Medicare payment from Oct. 1 through next September and will cost $320 million over that 12-month period.

Some hospitals will see their fines significantly reduced compared to last year. The penalty for St. Mary’s Hospital in Athens, Georgia dropped from 2.54% to 0.06%. St. Joseph East in Lexington, Kentucky, received the highest 3% penalty last year; It will lose 0.78% from October 1. Hunterdon Medical Center in Flemington, New Jersey, saw the penalty drop from 2.29% to 0.12%.

To limit fines, many hospitals in recent years have introduced new strategies to deter former patients from return visits. Dr. Robert Coates, interim chief medical officer of Hunterdon Health, owner of Hunterdon Medical Center, said in a statement that the hospital has developed a system to identify patients who come to the emergency room within 30 days of a hospital stay. Instead of readmitting them, Hunterdon helps them set up next-day appointments to monitor their health at the doctor’s office or at home. Hunterdon also calls all discharged patients within a week of leaving the hospital to make sure they filled their prescriptions and had a follow-up visit with a physician.

Dr. Jessica Satterfield, director of quality and clinical excellence at St. Mary’s Health Care System, which operates St. Mary’s Hospital, said in a statement that the hospital identified patients at risk of readmission when they were first admitted and focused on ensuring that . Their medications were correct and they had follow-up visits. “We are proud that our efforts are paying off in the form of greatly reduced fines but, more importantly, as a reflection of the exceptional care our staff and medical staff provide to our patients,” Satterfield said.

St. Joseph East did not respond to emails seeking comment.

Despite the changes, 43% of the country’s 5,236 hospitals have been penalized. Of those unconvicted, all but 770 were automatically exonerated. The 2,193 exempt hospitals include those specializing in children, psychiatric patients or veterans. Rehabilitation and long-term care hospitals are also excluded from the program, as are critical access hospitals, which Medicare pays separately to help stay open in areas where there are no other hospitals. The government also exempted Maryland hospitals because that state has a special payment arrangement with Medicare 75% of hospitals evaluated by Medicare were penalized.

For the fiscal year that began this month, Medicare cited the pandemic in giving hospitals a reprieve from its other major quality-focused effort that assesses penalties: the Hospital-Acquired Condition Reduction Program. It reduces Medicare payments by 1% to the quartile of general hospitals with the highest rates of infections and other potentially preventable patient injuries. For the previous fiscal year, CMS penalized 764 hospitals under that program. Those fines — which will cost hospitals an estimated $350 million this year — will resume next fiscal year, to better treat Covid patients. CMS will also revise the readmission penalty program to distinguish pneumonia patients from Covid patients.

“Covid is a tremendously disruptive force for all aspects of health care, certainly CMS’s quality measurement program,” Demehin said. “It’s probably going to be a turbulent couple of years for the readmission penalty.”

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