Hospital Admissions Part II: The Finances of Combining Admissions and the Readmission Penalty

Should hospitals combine two admissions into one? In the absence of CMS guidance, hospitals are urged to do the right thing. 

Last week I wrote a confessional for RACmonitor eNews, Hospital Admissions: Combining Two into One Doesn’t Add Up, about how I had been advising hospitals incorrectly on billing a readmission for a patient who returned to the hospital the day after discharge and required readmission.

In response, I received a question on the RAC (Recovery Audit Contractor) Relief user group from Dr. Jill O’Brien, the medical director of case management at The Miriam Hospital in Providence, R.I., and a similar question from Nina Youngstrom from Report on Medicare Compliance. 

Dr. O’Brien asked, “I’m wondering how this would fit with Hospital Readmission Reduction Penalty Program (HRRP), and if combining the two admissions would be perceived as ‘gaming’ to avoid potential readmission penalty in the pneumonia cohort?”

Nina Youngstrom asked, “the hospitals also will get penalized under the readmission reduction program, right? Where does that fit in?”

So if two people had similar questions, perhaps others also did. And here is my response (with a bit of editing and commentary).

First, the whole readmission reduction program is a farce (perhaps I should not use such a strong word, but I think sometimes the Centers for Medicare & Medicaid Services (CMS) acts first, then thinks later). Does anyone know why CMS uses 30 days? Well, I will tell you: because 30 days is the number of days in April, June, September, and November. There is absolutely no science behind using 30 days. There are seven months with 31 days and only four with 30 days, and of course February usually has 28 days, so why choose 30 over 31? It’s because 30 is an even number and a factor of 10, and “30-day readmission rate” sounds better than “31-day readmission rate.”

Does anyone really think a readmission on day 29 was at all the result of anything the hospital or doctors did wrong, especially for a diagnosis like heart failure, wherein hospitalization does not cure the patient, but only stabilizes him or her until the next exacerbation? Is it the hospital’s fault the patient eats Ramen noodles, which are loaded with salt, to save money? Or that their Part D prescription drug plan would not refill their furosemide because they were one day early and the next time they could get to the pharmacy was a week later? If a hospital discharges a pneumonia patient mid-February and in early March they slip on ice going out to get the mail and break a hip, is that the hospital’s fault?

Second, it is only with the future year’s readmission rate calculations that CMS will start to consider social factors (CMS’s first baby step in this area will account for the number of dual-eligible patients, those with coverage from Medicare and Medicaid, when calculating the expected readmission rate as of 2018.) Does anyone think that a patient’s social determinants of health (such as homelessness, substance abuse, or domestic violence) have no effect on their risk of readmission? 

Additionally, readmission calculations are based on any hospital admission after an “index admission,” even if the readmission is to another hospital. But unless the patient returns to the same hospital, the “index hospital” is never told that there was a readmission. In one informational call, a CMS representative used the common and overused “because of HIPAA” excuse for not sharing readmission information. So how can a hospital possibly work to prevent readmissions if they never are informed that a patient was readmitted to another hospital? Hospitals are not asking to be notified when the readmission happens to try to circumvent the system or convince the other hospital not to readmit the patient, but simply to be able to review the record from the admission to ensure that they did everything right throughout the hospital stay and made proper post-acute arrangements for the patient.

Now, don’t get me wrong; reducing readmissions is important, and patients should expect to be discharged only when they no longer need hospital care and they have been provided a safe discharge plan. But there are a myriad of factors involved in readmissions, and yet CMS puts all the blame on the hospital. Shouldn’t it also be shared with the home health agency when their nurse fails to show up for a home visit, or the primary care physician who fails to get around to completing the prior authorization for the new medication prescribed at discharge? Or, maybe, is that the fault of the hospitalist who should have done the prior authorization prior to discharging the patient? How about the patient’s family member who convinced them not to finish their antibiotic but instead take a homeopathic remedy for their pneumonia; did that not contribute to the readmission? 

But let’s go past my personal commentary on the Hospital Readmissions Reduction Program (HRRP) (even though it feels good getting it off my chest) and let me address questions about the financial side of things. 

First, let me analyze the situation if the hospital goes by the book and bills two admissions. Let’s say the first admission was coded to DRG 194, simple pneumonia with a complication or comorbidity (CC), with a geometric mean length of stay (GMLOS) of 3.3 days and a weight 0.9469, for which it was paid $5,000. The second admission was coded to DRG 178, respiratory infection with CC (which we often call “complex pneumonia”), with a GMLOS of 4.7 days, a weight of 1.3247, and a payment of $6,994. So billing two admissions separately nets the hospital $11,994. But since the patient was readmitted within 30 days, the readmission would be used to calculate the hospital’s readmission penalty for the next three years. 

The readmission penalty is calculated based on the expected readmission rate compared to the observed readmission rate. (The actual formula used for this calculation of expected readmission rate can be found on the QualityNet website, but I warn you that unless you have a Ph.D. in theoretical mathematics, you are unlikely to understand it.)

It is impossible to know how much one additional readmission will affect any one hospital’s payments for the next three years, but my very rough calculations suggest that one additional readmission would lower a hospital’s overall Medicare payments for a year by approximately $1,000 (do not quote me on this number or call it a benchmark!) So over the next three years, the hospital would be paid $3,000 less because they readmitted a single patient (I will repeat my caveat: every hospital is different and every year’s rate will be different, so it is impossible to know prospectively the dollar value of the penalty associated with one readmission).

Now I will look at my recommendation to combine the two admissions and submit one claim, as if the patient never was discharged. If the two admissions were combined, the single admission still likely would fall into DRG 178, and the hospital would get $6,994. But there would be no penalty for a readmission. 

So overall, the net pay after three years to the hospital if it billed two separate admissions would be $8,994; that is, $11,994 for two DRGs, less the $1,000 penalty for each of the three years.

The net pay to the hospital after three years if it combines the two admissions into one would be $6,994. It gets paid for the one admission and has no resultant financial effects for the next three years.   

So if the hospital was trying to game the system to avoid the penalty by combining the admission, it was actually doing the right thing for the Medicare Trust Fund because it got paid $2,000 less. Who in their right mind would game a system to get paid less?

Then you have to ask: did avoiding that one readmission affect the hospital’s Medicare star ratings or other public reported measures? One readmission is unlikely to make a significant difference in the numbers, but I must admit it is certainly possible, just as the patient whose body mass index (BMI) is 24.99 and at a “normal” weight, but if they have a second serving of dinner and gain 0.01 pounds, their BMI is 25 the next morning, meaning they are suddenly “overweight” and have a multitude of health risks! While we see little risk in this one readmission, I am sure our marketing departments that have to face the fallout if we surpass a threshold would have a different opinion.

So, as you can see, this is beyond complex, and I was probably right to avoid the financial discussion the first time. All I was trying to do was suggest that hospitals to do the right thing, ethically; just as blaming hospitals for 30-day readmissions leaves a bad taste in my mouth, so does billing a brand new admission for a patient returning for the same condition the day after they were discharged. 


Ronald Hirsch, MD, FACP, CHCQM, CHRI

Ronald Hirsch, MD, is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays. The opinions expressed are those of the author and do not necessarily reflect the views, policies, or opinions of R1 RCM, Inc. or R1 Physician Advisory Services (R1 PAS).

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