Health Care Bill's Plan to Cut Medicare Payments to Hospitals that Readmit Ill Seniors Could Have ‘Serious Consequences,’ Says Hospital Association

By Matt Cover | October 23, 2009 | 6:45 PM EDT

Sen. Max Baucus, D-Mont., successfully steered his health care reform bill through the Senate Finance Committee on Tuesday, Oct. 13, 2009. (AP Photo/Alex Brandon)

( – Slashing Medicare payments to hospitals that readmit ailing senior citizens--a component of the health care reform bill under consideration in Congress--could have serious consequences for the hospitals, including raising costs on hospitals an estimated $19 billion over 10 years, according to the American Hospital Association.
A plan to reduce preventable hospital readmissions is included in all of the health care bills before Congress and would impose a fee on hospitals that readmit patients for certain conditions, such as pneumonia and heart failure.
The details on how the readmissions policy would work, however, are largely left up to the Health and Human Services Department (HHS), a fact that concerns the nation’s hospitals. The penalties would only apply to hospitals where the readmission rates were well above the national average.
The measures are designed to improve the delivery of health care to Medicare patients by realigning the government’s payments to hospitals away from the current fixed-rate system--where the government pays for everything--to one that better rewards quality and efficiency.
“The bill creates quality and efficiency incentives that will improve care and cut down on waste, such as unnecessary hospital readmissions,” Sen. Max Baucus (D-Mont.) said in a press release accompanying the introduction of the Senate Finance Committee’s version of health reform.
Baucus’ version of the readmissions policy would penalize hospitals 20 percent of their Medicare reimbursement rates if patients are readmitted for the same condition within seven days and by 10 percent if readmitted within 15 days.
“Starting in FY 2013, hospitals with readmission rates above a certain threshold would have payments for the original hospitalization reduced by 20 percent if a patient with a selected condition is re-hospitalized with a preventable readmission within seven days and by 10 percent if a patient with a selected condition is re-hospitalized with a preventable readmission within 15 days,” the summary text of Baucus’ bill reads.
The Senate Finance Committee left the definition of a “selected condition” up to the HHS, specifying only that the government use eight conditions with a high rate or cost of readmission. The government can expand the list of selected conditions after three years, in 2016.
As the summary states, “Three years after implementation of the readmissions policy, the [HHS] Secretary would have the authority to expand the policy to other conditions. Additional conditions would be selected based on: (1) high spending on readmissions or high rates of readmissions; and (2) other criteria as determined by the Secretary.”
The American Hospital Association (AHA), in comments submitted to Baucus May 15, said that the Finance Committee’s plan could lead to “serious consequences” if the government does not get the details right.
“Hospital leaders and clinicians who care for patients recognize that some readmissions can be prevented,” the AHA said.
“But there are a number of factors beyond the hospital’s control that affect whether a patient is readmitted, including the natural course of the disease, the limited availability of post-acute and ambulatory health care services, high levels of poverty among some hospitals’ patients, and a lack of community-based social services,” it added.
“If these factors are not accounted for, they will lead to payment penalties, inequities and other serious consequences--intended and unintended--for hospitals, particularly safety-net hospitals,” said the AHA.
The health care bills in the House, similar to the Baucus bill, differ in that the penalty would apply to hospitals that have readmission rates above their expected rates for three diseases: pneumonia, heart disease, and heart attack, regardless of whether the patient was originally treated for one of these conditions. Also, starting in 2013, the HHS could expand the list of selected conditions without limit.
The AHA said that the proposed penalties, the lower reimbursement rates, could cost hospitals an estimated $19 billion over 10 years, and it urged House Speaker Nancy Pelosi (D-Calif.) to adjust the penalties to avoid wrongly punishing hospitals for readmissions they could not control.
“The policy in the House reform bill would link hospital performance on readmissions to
Medicare payments, and represents a potential cut of $19 billion dollars to America’s hospitals over 10 years,” AHA President Tom Viselac told Pelosi on Sept. 15 in testimony before the House Democratic Steering and Policy Committee.
“Beginning in FY 2012, it would reduce payments to hospitals, including critical access hospitals, with higher-than-expected 30-day readmission rates for heart attack, heart failure and pneumonia,” testified Viselac. “This payment cut would apply to all Medicare discharges--not just cases involved in a readmission. Madam Speaker, we believe that this proposal is overly aggressive.”
Robert Book, senior research fellow in Health Care Economics at the conservative Heritage Foundation, told that readmissions were a serious problem and that Congress’ method was “relatively crude.”
“These bills are addressing a real problem,” he said. “The thing with hospital readmissions is a real problem that gives hospitals perverse incentives, and they get paid more when they have lower quality. On the other hand, this is a really blunt instrument to try to use to correct it.”
“It’s not clear that this is the right way to do it, but it’s not obvious what a better way might be,” he said.