How to Survive CMS’s Most Recent 3% Hospital Readmissions Penalties Increase

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On October 1, 2014, the final payment and policy changes for hospital readmissions from CMS went live. Just weeks into the change, thousands of hospitals across the United States are feeling the financial pressures of the increased penalty.

While the penalty itself isn’t a surprise, the increase in the maximum penalty — up from two percent to three percent — means there has already been a decrease in payments from Medicare for health systems with high readmissions rates. CMS applies the penalty to the base operating DRG (diagnosis-related group) payment.

Health systems also now need to track two more 30-day readmission rates: chronic obstructive pulmonary disease (COPD) and total hip arthroplasty/total knee arthroplasty (THA/TKA). These rates are in addition to the following patient cohorts hospitals already track: heart attack (AMI), heart failure, and pneumonia.

CMS’s reduced payments start in October of 2014 for Fiscal Year (FY) 2015. For health systems already struggling with other improvement initiatives, such as Meaningful Use and value-based purchasing, this additional financial burden presents a call to action for health systems to work closely with clinicians to improve their measures.

Why the Need to Levy Hospital Readmissions Penalties?

CMS policy makers started the Hospital Readmission Reduction Program back in 2012 with the goal to improve healthcare. They believed that health systems with excess readmissions for patients with high-risk conditions, such as heart failure or pneumonia, were providing low quality patient care and if those health systems reduced their readmissions numbers, the decrease would signify improved patient care.

During the first year of the program (FY 2013), the conditions CMS focused on improving were pneumonia, heart failure, and acute myocardial infarction. The penalty for excess readmissions that year was one percent. In the second year of the program (FY 2014), conditions remained the same, but CMS increased withheld reimbursements to 2 percent of regular reimbursements.

Fiscal year 2015 is now in full swing, and the maximum penalty is three percent. This increase impacts 75.8 percent of hospitals across the United States with decreased payments. CMS’s calculations for the increased three percent penalty are based on a three-year period of discharges from July 1, 2010 to June 30, 2013. Because of a previous miscalculation of payment adjustment factors, the U.S. government republished an updated ruling on October 3, 2014.

The results of the program are positive to date. In fact, CMS has estimated that hospital readmissions declined by a total of 150,000 from January 2012 to December 2013, a significant improvement.

Hospital Count and Penalty Range 2015

 Zero-to-3% penalty breakout relative to the number of hospitals affected by the 2015 readmissions penalty increase.

Public Concerns about Risk Adjustments for Socioeconomic Status

There have been many public comments concerning a risk adjustment for SES (socioeconomic status). Yet despite the concerns, CMS isn’t adding any risk adjustments because it already monitors the impact of SES on hospital results. What’s more, CMS’s research shows that hospitals caring for large proportions of patients with low SES are actually capable of performing well on the measures.

Future CMS Readmission Penalty Measures and What They Mean

CMS does not have any plans to expand the conditions in 2016. However, it does have data that suggests the reduction of the readmit rate following coronary artery bypass graft surgery (CABG) is an important target for future quality improvement initiatives. As a result, CMS will add CABG to monitored conditions in 2017. This measure aligns with the strategy to promote successful transitions of care from the hospital setting to the outpatient setting. The measure also meets the criteria of high cost, high volume. The data for 2017 will be based on the period of July 1, 2012 to June 30, 2015.

This means a hospital’s current activities and interventions for CABG and the other five conditions will be reflected in the 2017 penalty file. The 2009 median rate for Medicare CABG 30-day, risk standardized readmission is 17.2 percent, and the range goes from 13.9 percent to 22.1 percent.

Strategies to Reduce Readmission Rates

If you search the web, there are many articles on strategies to reduce the readmission rates, especially for the heart failure population. But in my experience, there is generally not one single strategy that produces results. Instead, hospitals need to implement several strategies and monitor for success.

As reported by the authors of an article from the July 2013 issue of Circulation: Cardiovascular Quality and Outcomes, “Hospital Strategies Associated with 30-Day Readmission Rates for Patients with Heart Failure,” there are six strategies that are associated with significantly reduced readmissions rates. The authors surveyed data from 599 hospitals to determine the hospitals’ methods for reducing readmission rates. The six strategies the hospitals employed included:

  • Partnering with community physicians and physician groups
  • Partnering with local hospitals
  • Having nurses responsible for medication reconciliation
  • Arranging for follow-up visits before discharge
  • Having a process in place to send all discharge summaries to primary care physician
  • Assigning staff to follow-up on test results after discharge

How One Large Health System Achieved Reduced Readmissions

Achieving reduced readmissions is possible when the right systems to capture data are in place. For example, one large health system used four key interventions to lower their 30-day heart failure readmission rates by 29 percent. They were able to achieve these results by using the following evidence-based interventions:

  1. Medication reconciliation: Physicians reviewed the patient’s medications and gave them explicit instructions on how to properly take the medications.
  2. Post-discharge appointments: Patients were scheduled for follow-up care before being discharged. Patients with a high risk for readmission received appointments to return within seven days of discharge; others were scheduled to return within 14 days.
  3. Post-discharge phone calls: Within a specified time frame following discharge — based on the patient’s risk for readmission — a member from a coordinated care team called each patient to assess their condition and to see if they have any questions or are having any problems with their medications.
  4. Teach back interventions: Patients needed to show their comprehension of the information they were being given by being asked to explain it.

Eight months after implementing the four evidence-based interventions, the health system experienced a:

  • 29 percent reduction in 30-day HF readmissions
  • 14 percent reduction in 90-day HF readmissions
  • 120 percent increase in follow-up appointments
  • 78 percent increase in pharmacist medication reconciliation
  • 87 percent increase in follow-up phone calls
  • 84 percent increase in teach-back interventions

3 Ways to Achieve Significant Heart Failure Readmission Rates

In order for interventions to be successful, however, strategies and tools need to be in place to collect and analyze the pertinent data that will help clinicians find the answers they’re looking for. For the health system in the example above, three critical solutions were implemented. The solutions were as follows:

  1. A data warehouse to provide a single source of truth

The health system knew that data needed to be at the core of their improvement efforts, but merely collecting the data wouldn’t be enough — providers also needed to be able to access the data. If they had gone the route of deploying a traditional data warehouse, they could end up spending years before it was fully deployed.

Instead, the health system chose an alternative solution — a late-binding data warehouse. The late-binding data warehouse was able to overcome the limitations of a traditional data warehouse because of its agile platform. (An agile platform supports the fast-changing rules and use cases of healthcare data, and also delivers value in a matter of weeks.) In fact, the health system was able to fully deploy their data warehouse within a few months versus years because of the late-binding architecture.

  1. Engaged multidisciplinary team to lead improvement efforts

To be successful, the health system knew they needed to engage physicians and build a culture of trust — through transparency and collaboration — and align on the vision of improved outcomes. They could choose to go fast, without clinician engagement. But they knew they could go further with the support of clinicians. So they organized a multidisciplinary team that included physicians, nurses, informaticists, quality, analytics, IT, operations, and finance.

  1. Analytics to drill down into each episode of care

After the health system implemented a sophisticated analytics platform, clinicians had the ability to drill down into each episode of care and assess the timeliness of interventions and to ensure the interventions were taking place. For example, clinicians were able to determine if patients came back for their follow up appointments and how many days after the original appointment. Tracking data like this manually was time consuming and expensive. But with an analytics solution, clinicians had access to near-real-time data that identified variations in care — all the way down to each individual provider. In addition, clinicians didn’t need to wait for someone in IT to complete their request, increasing time to value. This was because the analytics platform included an easy-to-use visualization tool that didn’t require complicated queries for clinicians to get the answers they needed.

Readmission Penalties Are Here to Stay

The U.S. healthcare system is in the midst of a massive transformation to improve patient care and reduce costs. It’s a daunting task for healthcare organizations, especially when additional reporting measures are required as CMS rolls out regular updates to the Hospital Readmission Reduction Program. The challenges become even greater for health systems facing increased penalties because they haven’t yet found ways to reduce their readmissions rates. This leaves them susceptible to higher penalties and greater public scrutiny.

While many health systems believe a traditional EDW will help them achieve the improvements necessary to comply with CMS mandates, the technology isn’t adequate. The best data architecture should be late-binding. But in addition to the right architecture, teams need to want to interact with the data and see the value in using it for improvement initiatives. An analytics system that provides near-real-time analytics gives clinicians and analysts the data they’ve been asking for, and enables them to — not just ask — but to also answer questions about how to gain significant improvements in readmissions rates.

How did your hospital fare when the readmissions penalties increased to three percent? If you’re facing a financial burden, do you have any questions about how a Late-Binding Data Warehouse™ can help you avoid future penalties?

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