The costs of hospital readmissions are a major topic of concern in the healthcare industry, impacting a hospital’s quality of care as well as their financial health. As value-based reimbursement models begin to replace fee-for-service, developing a strategy to reduce readmissions is essential to protecting your hospital’s bottom line.
Breaking Down the Cost of Hospital Readmissions
The 2010 Affordable Care Act (ACA) established the Hospital Readmission Reduction Program (HRRP), a value-based purchasing program. Because it is value-based, it allows Centers for Medicare & Medicaid Services (CMS) to reduce payments to hospitals with higher than expected risk-standardized 30-day readmission rates for the following conditions and/or procedures:
- Acute myocardial infarction (AMI)
- Heart failure
- Chronic obstructive pulmonary disease (COPD)
- Coronary artery bypass graft (CABG) surgery
- Elective primary total hip arthroplasty and/or total knee arthroplasty (THA/TKA)
CMS calculates the payment reduction for each hospital based on its performance during a rolling performance period. Payment reductions are then applied to all Medicare fee-for-service base operating diagnosis-related group payments during the fiscal year. The payment reduction is capped at 3%.
Cost of Hospital Readmissions in 2021-2022
CMS estimates that because of the HRRP, Medicare will save an extra $521 million in the 2021-2022 fiscal year. At the beginning of the FY, CMS reduced payments to 2,499 hospitals (47% of all facilities) due to high readmissions with an average penalty of 0.64% per Medicare patient stay.
The Benefits of Reducing Hospital Readmissions
Over the past decade, reducing hospital readmissions has been a major priority in healthcare. This pre-ACA study of Medicare fee-for-service claims data from October 2003 to December 2004 will help explain why. Here are some key takeaways from that study:
- One in five Medicare patients discharged from a hospital was readmitted within 30 days, costing Medicare $17.4 billion in 2004.
- 67% of patients who were discharged with medical conditions and 51.5% of those discharged after surgical procedures were rehospitalized or died within a year of discharge.
- For half of the patients readmitted within 30 days, there was no bill for a physician between the time of discharge and the time of readmission.
- An estimated 10 percent of readmissions were likely to have been planned.
This is the context in which legislators drafted and passed ACA. While reducing costs for Medicare is an obvious incentive for the federal government, the benefits of reducing hospital readmissions stretch far beyond taxpayer dollars.
Positive Reputation for Quality
For valid reasons, patients may be hesitant to visit a hospital with a high readmission rate. Reputation for quality is considered to be a profit driver due to the relationship between quality of care and financial performance. Providing higher quality care can lead to higher profitability by increasing revenue and/or saving on the costs of hospital readmissions by avoiding penalties.
Improved Patient Communication
Receiving follow-up care by primary care physicians (PCP) within 7 days is associated with meaningful reductions in readmission risk for patients with a greater than 20% baseline risk of readmission. Though this is recommended in the patient’s discharge plan, patients don’t always comprehend the information provided to them.
Luckily, there’s a very simple solution: thorough, patient-centered communication. Doing things like using easy-to-understand language, going over discharge information verbally, and providing digital and/or printed copies can help ensure patients follow care instructions. Conversations between patient and provider should be a dialogue in which patients can freely ask questions and share any information or concerns with the provider that can help prompt the patient to disclose things like medications they don’t take regularly and to receive clarification on anything that may have been misunderstood or unclear.
Optimized Transition of Care
In the past, providers and care managers have had a difficult time controlling readmissions because they aren’t alerted when a patient is hospitalized. Patients may not think to call a member of their care team after a hospitalization, which leaves them to learn about a hospitalization via claims data. Claims and authorization data is often delayed by several months, so providers may not be notified of a hospital admission and are unable to provide adequate follow-up care.
Setting up real-time ADT notifications is proven to result in reduced readmissions. Since implementing ENS, Brevard Health Alliance has seen an overall reduction in admissions, including a reduction in hospital readmission rates for Medicaid patients from 17.29% in 2017 to 8.59% in 2018, and a reduction in hospital readmission rates for Medicare patients from 19.15% in 2017 to 13.25% in 2018.
Fortunately, there are tools that can help. The Encounter Notification System (ENS) powered by Audacious Inquiry has been proven to effectively track patients, helping both improve transitions of care and close gaps in care for the uninsured and underinsured. Contact us today to learn more!
About the Author
Morgan Fitzgerald is a guest writer for Audacious Inquiry and a member of Silverback Strategies. As a content strategist, Morgan and the team at Silverback collaborate with Audacious Inquiry to create relevant and reliable content for the benefit of Audacious Inquiry’s healthcare audience. To learn more about Silverback Strategies, visit their website or LinkedIn.