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Not surprisingly, the Obama administration has noticed the readmission problem, not just because of the safety issue but because of the costs it adds to Medicare (now estimated at $17.4 billion yearly).1 It is not surprising to see the inclusion of a Hospital Readmissions Reduction Program in the Patient Protection and Affordable Care Act (Affordable Care Act).2


IPPS Payments to Link to Readmission


Beginning in fiscal year 2013, inpatient prospective payment system (IPPS) rates will be adjusted based on the dollar value of each hospital’s percentage of potentially preventable Medicare readmissions for the three conditions with risk-adjusted readmission measures that are currently endorsed by the National Quality Forum (NQF) (http://www.qualityforum.org/). These conditions are heart failure, pneumonia and acute myocardial infarction.


The risk-adjusted readmission measures were calculated as part of the Reporting Hospital Quality for Annual Payment Update (RHQDAPU) program requirements for the 2010 payment update and are posted on the Centers for Medicare & Medicaid Services (CMS) website. Hospitals were given the opportunity to preview these data by May 8.


In addition to hospital readmission rates, tuture reporting, measure definitions, and methods can be found under the “Hospitals – Inpatient” tab at the QualityNet website (http://www.qualitynet.org/).


According to the IPPS final rule for FY 20093, higher hospital readmission rates are linked to higher costs and also to lower quality of care received during hospitalization and after the initial hospital stay. CMS increasingly promotes quality and efficiency of care through the application of value based purchasing (VBP) tools. The VBP methodology is meant to promote adherence to evidence-based best practices by rewarding high-achievement.


New Law Increases Oversight


The Affordable Care Act includes several new, and important, provisions related to acute care hospitals. Two of these provisions are described below.

  • Payment adjustments for excessive readmissions. Adjustments in IPPS rates will be made to account for excess readmissions during FY 2013 and beyond (on and after October 1, 2012). Each adjustment will be calculated with a percentage based on a comparison of the facility’s aggregate payments for excess readmissions and aggregate payments for all discharges. The Department of Health & Human Services (HHS) Secretary will make these changes available to the public.
  • Patient safety organizations: Via the Affordable Care Act, Congress added a new section to the Public Health Services Act (PHSA) entitled the Quality Improvement Program for Hospitals with a High Severity Adjusted Readmission Rate. This provision applies to hospitals that the HHS Secretary determines have 1) a high rate of risk-adjusted readmissions for conditions or procedures that are high volume or have high expenditures under Medicare4 and 2) have not taken appropriate steps to reduce such readmissions and improve patient safety.5




1Rehospitalizations Among Patients in the Medicare Fee-for-Service Program by S.F. Jencke, et.al. N Engl J Med 360;14, April 2, 2009

2 Patient Protection and Affordable Care Act: Law, Explanation, and Analysis Explanations, Chapter 7–Health Care Quality Improvement:  Development of New Patient Care Models:  ¶749, Hospital Readmissions Reduction Program

3The FY 2009 inpatient PPS final rule can be found at https://www.cms.gov/AcuteInpatientPPS/IPPS2009/list.asp.

4This information can be found in the Social Security Act (SSA), Section 1886(q)(8)(A), can be found athttp://www.socialsecurity.gov/OP_Home/ssact/title18/1886.htm.

5PHSA, Sec. 399KK, as added by Sec. 3025(b) of the Affordable Care Act) at http://thomas.loc.gov/cgi-bin/query/F?c111:7:./temp/~c111JSF5jr:e949445



MedPAC’s Two Cents


The Medicare Payment Advisory Commission (MedPAC) identified the following conditions in its June 2007 report to Congress.6 It also reported that hospital readmissions for these conditions make up almost 30 percent of spending on readmissions.



Number of Admissions w/ Readmissions

Readmission Rate

Average Medicare Payment for Readmission

Total Spending on Readmissions

Heart failure






























Other vascular





Total for seven conditions





Total DRGs



*Key to acronyms used in the table: COPD (chronic obstructive pulmonary disease), AMI (acute myocardial infarction), CABG (coronary artery bypass graft), PTCA (percutaneous transluminal coronary angioplasty), DRG (diagnosis related group). Analysis is for readmissions within 15 days of discharge from the initial inpatient stay. Readmissions are identified using 3M software that defines potentially preventable readmissions. (3M analysis of 2005 Medicare discharge claims data).


NQF on Care Coordination


The National Quality Forum (NQF) 7 defines care coordination as “a function that helps ensure the patient’s needs and preferences for health services and information sharing across people, functions and sites over time. Coordination maximizes the value of services delivered to patients by facilitating beneficial, efficient, safe, and high-quality patient experiences and improved healthcare outcomes.”


Understanding the importance of care coordination is the first step to improve your hospital’s outcomes. Studies have shown that readmissions occur because of the missteps that occur during the transition of care.


The NQF identified five domains to improve care coordination: healthcare “home.” proactive plan of care, communication, information systems and transitions or “hand-off.” Hospitals may develop process-improvement initiatives from all five domains.


It also identified the two operational inefficiencies listed below that hospitals can address to see significant improvement and results: communication and transitions.

  • Communication. Information about the patient’s plan of care, diagnostic testing and test results needs to flow freely among healthcare providers and should include shared decision-making with patients and their families.
  • Transitions or hand-offs. This important process refers to patient transitions between care settings (for example, leaving the hospital to return home or leaving the hospital to go into a skilled nursing home). A quality-improvement initiative that encompasses medication reconciliation also has gained significant attention since it is an area of common mishaps during the transition period resulting in a readmission.


Taking Action


Proactive hospitals are taking action now to determine the causes of readmission rates in their facilities. They are analyzing their patient populations, discharge processes and community relationships to uncover opportunities for improvement.


To start your internal audit, pull readmissions records, starting with the targeted three diagnoses: AMI, heart failure and pneumonia. Ask this question: Was the patient clinically stable at discharge from the first admission? Apply a discharge screen criteria to find out.





7The National Quality Forum: Endorsing Preferred Practices & Performance Measures for Measuring & Reporting Care Coordination athttp://www.cfmc.org/caretransitions/files/pptCMS_CareCoord_FINAL.pdf




Next, review your discharge planning process, asking these questions:

  • Was the next level of care (for example, to the patient’s home with homecare service or to a SNF) for the discharge appropriate?
  • Was the exchange of information during the transition appropriate?
  • Were the patient, family and/or caregiver involved in the discharge plan?
  • Were the discharge Instructions comprehensive?
    • Was the patient educated about his/her diagnosis and the reason for admission?
    • Was the patient instructed about follow-up appointments for lab work, physician visit, diagnostics, etc.?
    • Were the medications reviewed (both newly prescribed and resuming an old medication regime)?
    • Did the patient receive written instructions?
    • Did you receive confirmation that the patient understood the instructions provided?


As you can see from the above, readmission for the Medicare beneficiary is a quality issue and will soon have financial impact on hospitals.  Now is the time to address your hospital’s operations to improve outcomes.

About the Author


Barbara Vandergrift, RN, BSN, MA, is a senior healthcare consultant with Medical Learning, Inc. (MedLearn®), St. Paul, MN. MedLearn is a nationally recognized expert in healthcare compliance and reimbursement. Founded in 1991, MedLearn delivers actionable answers that will equip healthcare organizations with their coding, chargemaster, reimbursement management and RAC solutions.

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