Readmissions: Understanding the Complex Finances and the Hidden Nuances

Readmissions: Understanding the Complex Finances and the Hidden Nuances

Readmissions are a common topic of concern around hospitals and rightly so, but the issue is much more complex than it seems. First, of course we all want to reduce readmissions. In fact, don’t we all want to reduce every single hospital admission? Wouldn’t it be great if no one ever needed hospital care? But for now, that’s not a realistic goal. On the other hand, addressing readmissions is realistic.

So let’s talk a bit about readmissions.

First, everyone is familiar with the Medicare 30-day readmission reduction program. CMS calculates a hospital’s 30-day readmission rate each year, compares it to the facility’s expected readmission rate (don’t try to understand the math just remember that every diagnosis could affect that rate, even non-CCs and MCCs, so be sure your documentation and coding are comprehensive and accurate) and determines if the hospital will be penalized for the next three years.

But why 30 days? Is it because that’s the time frame for most preventable readmissions? Nope, the literature says that’s about 7-8 days. Beyond that point, the majority are due to factors completely outside a hospital’s control, like the cost of medications and the many social determinants of health (SDoH). The reason it is 30 days is because that’s a nice number. There are more months in the year with 31 days than 30 but 31 would sound weird so the Centers for Medicare & Medicaid Services (CMS) chose 30. Not exactly scientific, is it?

By the way, the same applies for most numbers in medicine. I am getting off track but think for a minute about how many “convenient numbers” there are in medicine. Let’s look at BMI (which, by the way, has had its day in the spotlight and is slowly fading into obscurity). Does anyone really think that if the BMI and health of every human was analyzed, the breakpoint between good health and poor health would land at exactly 30.0? Not a chance.

And what about prescribing seven days of antibiotics? Why seven days? Because a week has seven days. Why does a week have seven days? Because in 321 C.E., Constantine the Great decreed that there would be seven days in one week. Science is magical, isn’t it?

And you ask about five- and 10-day treatments? That’s because we have five digits on one hand and 10 total digits. Imagine if a physician started prescribing eight days of an antibiotic instead of 10. How long before a pharmacist would call to confirm that? But I digress.

Returning to readmissions, assuming readmissions continue to happen, and penalties still exist, you have to look at payment. For traditional Medicare, every readmission, except the same day for the same reason, pays you another full DRG. Purely financially, Medicare readmissions back to your hospital bring in revenue. Let me repeat that. You get paid two DRGs if one of your inpatients is discharged and then gets readmitted back to your hospital, be it one day later, 29 days later, or any point in the future. Preventable readmissions should be prevented but if they happen, you still get paid by Medicare.

I will add here that all bets are off with every other payer including commercial, Exchange, or Medicare Advantage. For now, at least, they can and do adopt their own arbitrary payment policies for readmissions, refusing to pay if the readmission occurs within 7, 14, 21, or 30 days. Some look at relatedness and preventability. Some consider readmissions not only to the same hospital but to any hospital in the same health system. Some allow combining of both admissions so the payment may actually be fair but that is rare. I will add that CMS is aware that Medicare Advantage plans are ignoring the CMS readmission reduction program rules for payment for the readmission, despite the fact that the payment rules applicable to them when paying an out-of-network claim already account for the readmission penalty and has agreed to address this in future rulemaking.

But how can you quantify your Medicare readmissions? Open your PEPPER. The PEPPER reveals readmissions by showing not only how many of your index admissions were subsequently readmitted to any hospital within 30 days but also how many of those readmissions came back to your hospital.

If you had 200 total readmissions and 150 returned to your hospital, you were paid an additional 150 DRGs and that amount would far exceed any penalty. For one hospital, their readmission penalty was $600,000 but their revenue from the readmissions was over $5 million. Once again, strictly financially Medicare readmissions bring in revenue.

The other use of that PEPPER data is to quantify your organization’s patient outmigration. If the index admission was at your hospital and lots of patients were readmitted elsewhere, you have to ask why they didn’t come back when they got sick again. Is your food terrible? Do your doctors not communicate well? Is your public Wi-Fi slow? Do you charge for television? (I was unaware that still happens until I read an article by Nina Youngstrom “Report on Medicare Compliance” two weeks ago.) Or maybe you are a tourist town and most patients leave the community at discharge and go elsewhere next time.

Now as with all PEPPER data there is no right number, but from looking at hundreds of PEPPERs, the average readmit to same hospital rate is about 73 percent. Note that I did not say 75 percent because 73 percent sounds more authoritative, doesn’t it? I will also note that many have repeatedly begged CMS to inform a hospital when one of their index admission patients is readmitted to another hospital so that the hospital can look at the index admission and try to determine what, if anything, was done poorly. But despite some heartful begging, CMS refuses to provide such information.

Now as I noted, we all want to prevent readmissions that are preventable. And to that end, Kaiser Medicare Advantage published the result of their program at 15 of their hospitals. The program provided meals to patients who were hospitalized for heart failure. Interestingly, the base program provided two meals a day but MA patients whose coverage was provided through an employer retirement plan could get three meals a day. The results were impressive with a significant reduction in not only readmissions but also mortality.

Interestingly, Melissa Booth, a HEDIS risk specialist from Kentucky, noted on LinkedIn that her stepmother used such a program and one of the most significant benefits was the human contact with the delivery person, with loneliness an all-too-common issue facing the elderly. In fact, the reduction in death from the intervention was much more significant than the reduction in readmissions.

Perhaps Melissa’s observation was profound in that the human contact is what kept the patient “well” even more than the meals. If you want to dig into the Kaiser study, you can read it here.

Programming Note: Listen to Dr. Ronald Hirsch each Monday on Monitor Mondays as he makes his rounds during the long-running broadcast.

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Ronald Hirsch, MD, FACP, ACPA-C, 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, and the National Association of Healthcare Revenue Integrity, 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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