Healthcare News & Insights

CMS: Most hospitals getting penalized, spending more

For yet another year, roughly half of the country’s hospitals will have their bottom lines hurt because they couldn’t prevent enough readmissions. 

Stethoscope dollarThe Hospital Readmission Reduction Program was created by the Affordable Care Act and allows the Centers for Medicare & Medicaid Services (CMS) to adjust hospitals’ pay rates when they have excessive readmissions over a 30-day period.

Since its implementation, the number of readmissions has dropped nationally. However, there remains a large portion of facilities that continue to miss the mark.

Continued readmission issues

According to a recent analysis by Kaiser Health News, this year CMS is penalizing 2,592 hospitals.

To determine the fines, CMS tracked admissions for five different conditions: heart attack, heart failure, chronic lung conditions, pneumonia, and elective hip and knee replacements. It then looked at hospital size, patient mix and industry figures, as well as facilities’ rates of readmissions from July 2011 to June 2014.

According to the analysis, this year:

  • most of the penalized hospitals will see a .61% reduction for every medicare patient visit
  • 38 facilities will receive the maximum of 3%, and
  • 540 hospitals will have their overall Medicare pay adjusted by 1% or more.

Providers have complained the program is too harsh, and penalizes hospitals even if their overall number of readmissions dropped from year to year. However, CMS has shown its commitment to continuing with the program in recent regulation and responses to feedback.

This means providers will have to continue to invest in strategies, treatments and health IT that can help their particualr patient mix remain healthy after procedures.

Higher spending, higher prices

Although resources for reducing readmissions are scare for many hospitals, this may soon change.

According to new research released by CMS officials in Health Affairs, healthcare spending is expected to rebound and rise over the next 11 years and make for a larger portion of the country’s gross domestic product.

It’s projected that healthcare spending will raise about 5.8% per year due to expanded coverage from the Affordable Care Act and improved economic conditions over the past few years.

Researchers noted that as more Americans receive health insurance and out-of-pocket facility costs drop, hospital prices will rise accordingly. They project that by 2022 hospital price growth will peak at 3.1%.

Additionally, it’s expected the increasing price of drugs will play a large role in the increased growth of healthcare spending, particualrly from new breakthroughs like the Hepatitis C treatment.

On top of this, with the replacement payment system for the sustainable growth formula, providers will also have greater opportunities for incentives by meeting quality care measures.

In the meantime, hospital leaders should prioritize the resources they need to reduce readmissions and avoid price adjustments, while the industry continues to rebound economically.

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