Healthcare News & Insights

Readmission penalties formula revised again

As a hospital executive, you’d have to be living under a rock to not have heard about Medicare’s penalties for excessive readmissions. But did you know that Medicare has made yet another error when it comes to its formula for calculating these penalties?

That’s right. For the second time in six months, Medicare has erred in calculating readmission penalties for more than 1,000 hospitals.

For 1,246 hospitals, it’s a bit of good news, as it’ll lessen readmission penalties slightly. For example, St. Claire Regional Medical Center in Morehead, KY, had its penalty drop the most from 0.9% to 0.72%, according to Kaiser Health News (KHN), which analyzed the data provided by the Centers for Medicare & Medicaid Services (CMS).

Unfortunately for 226 hospitals, the recalculation of the formula resulted in a small increase in the penalties. LaSalle General Hospital in Jena, LA, will lose 0.84% of each Medicare payment per patient instead of the 0.65% that was previously projected by the first recalculation of the formula in September.

With this second recalculation, which averaged 0.03%, hospitals will pay $10 million less in penalties than previously calculated, noted KHN.

The change to the recalculation are retroactive to October 2012 when the Hospital Readmissions Reduction Program began.

Not a popular program

While not a popular program, most hospitals have been working hard to reduce their readmission rates, before the penalty max climbs. Right now the maximum penalty a hospital can receive is 1%, but in October it ramps up to 2% and next year it’ll be 3%.

Many hospital executives are crying foul, saying the penalty is unfair to facilities that treat a large number of low-income patients. Reason: These patients tend to be readmitted on a more frequent basis.

Hospital executives aren’t the only group pushing for changes to the program. The Medicare Payment Advisory Commission (MedPAC), a panel that reports to Congress, is devising changes that would lower or eliminate penalties altogether for hospitals.  These changes are based on the industry as a whole lowering readmission rates, and taking into consideration the economic profile of a facility’s patient population before setting penalties.

Don’t get your hopes up though, because these changes can’t be made by Medicare. They would have to be passed by Congress — not an easy feat considering the current disagreement over the health care law.

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