Don’t Get Stuck in the Readmissions Penalty Box
By Lisa Lyons
The Hospital Readmissions Reduction Program (HRRP) requires the Centers for Medicare and Medicaid Services (CMS) to reduce payments to inpatient hospitals with relatively high 30-day readmission rates. CMS applies up to a three percent reduction for “excess” readmissions using a risk-adjusted ratio that compares a hospital’s performance to the national average for sets of patients with specified conditions.
Payment adjustments for FY 2017 (based on performance from July 2012 through June 2015) will be applied to all Medicare discharges starting October 1 of this year and running through September 30, 2017. Payment reductions for FY 2017 will be posted on the Hospital Compare website this October.
Total HRRP penalties are expected to reach $528 million for FY 2017, up sharply from about $420 million in FY 2016, with more than half of the nation’s hospitals affected, according to a Kaiser Health News analysis. The average penalty will spike in similar fashion, from 0.61 percent in FY 2016 to 0.73 in FY 2017.
The situation calls for a thorough understanding of the readmissions penalty environment and a strategic mindset for taking action.
Prior to FY 2017, CMS measured excess readmissions by dividing a hospital’s number of “expected” 30-day readmissions for heart attack, heart failure, pneumonia, hip/knee replacement, and COPD by the number that would be expected, based on an average hospital with similar patients.
For FY 2017, CMS expanded the list of cohorts to include coronary artery bypass graft (CABG) procedures. The agency also added to the existing pneumonia cohort: the assignment criterion now includes cases where the principal diagnosis of non-severe sepsis includes secondary diagnosis of pneumonia and aspiration pneumonia. This creates a bigger set of patients from which a hospital could have readmissions — in fact, it may expand the pneumonia cohort by 50 percent in many hospitals.
Complicating matters, excess readmissions found in any of the six cohorts will result in an overall penalty. A hospital gets no credit for making readmissions improvements along the way.
At the same time, all hospitals are working on readmissions, so the average of excess readmissions is decreasing. That means it’s harder than ever for hospitals to stay under the penalty bar.
Also, due to HRRP’s reporting cycle, an excess readmission stays in CMS’s data for three years.
These factors make it hard for hospitals to know if they have passed the tipping point for readmissions penalties before notification from CMS — which typically happens just four months prior to penalties being imposed. In practical terms, there’s not enough time to impact results.
Further, analyzing CMS data is challenging for most hospitals because:
- CMS data is retrospective. CMS calculates fiscal year penalties by looking back at data over a range of two to five years. As such, current improvements to readmission reduction programs will not be seen right away.
- CMS data includes readmissions from “non-same” hospitals. Most hospitals can’t view cases where a patient initially admitted to their facility ended up being readmitted in another facility.
- CMS data only includes readmissions among the Medicare patient population. Many commercial payers have instituted pay-for-performance programs, which should also be analyzed. Limiting your view to the Medicare HRRP program will only reveal part of your overall readmissions.
- CMS’s Measure Methodology for Readmissions can’t be easily replicated. CMS risk-adjusts each qualifying patient using Medicare Part A and Part B data for a full year prior to admission, and 30 days post-discharge. Since hospitals don’t have access to this information, they can’t replicate the methodology to calculate their excess readmissions.
Fortunately, with the right data, there’s a way to emulate the CMS methodology to help estimate the volume of excess readmissions that will be attributed to your hospital. You can do so well before receiving your hospital-specific reports from CMS.
Here are four ways advanced analytics can help position hospitals to be more proactive in managing their readmissions:
- Purchase de-identified Medicare Part A and B claims data from CMS. Advanced analytics makes it possible to match historic claims data with known patients in your hospital information systems. In this way you can see longitudinal care histories for the patients you are discharging today. Algorithms can also predict the rate of non-same hospitalization from current readmission data, effectively filling in the blanks on readmissions that occur outside your hospital. That may give you up to two years advance notice regarding which readmissions will be counted as excessive. With that knowledge, you can do something about readmissions before the end of the evaluation period.
- Know how many readmissions will put you in jeopardy of incurring penalties. This is the previously mentioned tipping point. Surprisingly, for many hospitals, only a few excess readmissions per month can send them to the penalty box. Predictive analytics identify patients at greatest risk for unplanned readmissions. Look for algorithms with a high degree of accuracy in matching the CMS dataset to your own database to single out cases that were identified in the assignment criteria. Once you’re able to identify trends, you can fix the issues.
- Since CMS measures readmission back to any hospital, partner with other hospitals in your region to which you commonly refer patients back and forth. Concentrate on areas of improvement in either coordination or quality of care.
- Analyze clinical conditions across the board among your hospital’s patient population, not just within the six CMS-defined cohorts. Taking a broader view establishes more effective data patterning to help determine if a systemic problem exists. Dashboards and pre-formatted reports signal where to drill down for more detail (for example, whether you discharged the patient to home or a different care setting).
Government policy statements clearly indicate Medicare payments becoming more heavily weighted on quality or value measures, and HRRP will be part of that determination.
What’s more, CMS has proposed that the readmission measure itself be expanded to count excess days associated with readmissions — taking into account ED patients and those assigned to observation status — rather than singular readmission events for inpatients. Expect increased involvement of care management and quality teams in this area, and another layer of potential penalties.
Don’t wait to react to how these measures will impact your hospital’s operations and finances. Now’s the time to implement data analytics tools to intelligently manage your hospital’s readmission risk with a high degree of accuracy.
Lisa Lyons is director of advanced analytics and population health and interim VP of consulting at Xerox.