Can Financial Penalties Drive Hospitals to Improve Patient Care?

Both public and private healthcare payers have zeroed in on hospital readmissions as a prime target for quality improvement in the United States. Readmissions for Medicare patients cost taxpayers an additional $18 billion in 2010. Evidence suggests that many of these readmissions could have been avoided through better practices. When high rates of patients are readmitted to the hospital within a short time frame, it suggests that these patients are not receiving adequate care while in the hospital. Additionally, hospitals with high readmission rates might not provide patients substantial follow-up care.

Since 2009, Medicare has published data about hospital readmission rates. In 2012, Medicare increased pressure on hospitals to reduce readmissions through the Hospital Readmission Reduction Program (HRRP). Traditional payment from Medicare reimburses hospitals for each patient admission, regardless of how many times that patient is readmitted to the hospital.

The HRRP flips this traditional payment scheme and instead penalizes hospitals when patients are readmitted. Through the HRRP, hospitals are penalized when too many patients are readmitted within 30 days of discharge. The HRRP thus acts as a counterweight against the traditional payment scheme, providing financial incentives for hospitals to spend more on patient care to prevent costly patient returns.

In a recent study in Health Affairs, Kathleen Carey and Meng-Yun Lin seek to test whether these financial penalties drove reductions in hospital readmissions. The HRRP focuses on patient readmissions for three conditions: heart attacks, heart failure, and pneumonia. The researchers gathered data on Medicare patients admitted to hospitals within New York State before and after the penalties began.

Next, the authors compared the change in readmission rates for the HRRP conditions to the change in two separate control groups. The first control group consisted of Medicare patients who had conditions that were not targeted by the HRRP—for example, gastrointestinal conditions. The second control group consisted of privately insured patients with the conditions that were targeted by the HRRP. This design allowed the researchers to determine whether readmission rates fell more for the conditions affected by HRRP financial penalties than they did for conditions without penalties in place.

Overall, Carey and Lin found evidence to suggest that the HRRP lowered readmissions for the targeted medical conditions. When compared to the first control group of Medicare patients, HRRP-targeted patients saw an additional two percentage point drop for heart attack readmissions and an additional one percentage point drop for heart failure. Pneumonia readmissions also fell more for HRRP-targeted patients, but the effect was not statistically significant.

When the researchers compared HRRP Medicare patients to privately insured patients with the same medical conditions, they found that readmissions increased for HRRP patients with heart attacks but decreased substantially (over one percentage point) for pneumonia.

Finally, the researchers looked at potential unintended consequences of the HRRP financial penalties. First, hospitals could choose to readmit patients for observation stays or to the emergency room (ER). These types of readmissions do not count against the hospitals as penalties. Second, hospitals could postpone readmissions, choosing to readmit more patients after 31 days to avoid the 30-day window for the penalty. The authors did find evidence of higher rates of observation and ER readmissions for HRRP patients. But, when compared to a control group of Medicare patients, this effect was not very strong. Further, there was almost no change in readmission rates after 31 days. These findings suggest that the HRRP does not drive hospitals to postpone patient readmissions in order to circumvent program penalties.

The researchers note that their study is limited by its exclusive focus on the state of New York. Because New York has a higher proportion of Medicare beneficiaries and a higher rate of readmission than the national average, the results may not be reflective of the nation as a whole.

However, the authors do note that annual changes in readmission rates were miniscule before the HRRP was put in place. This suggests that readmission rates would not have fallen as dramatically without this financial pressure. Further, they argue that, if readmissions fell for both HRRP and non-HRRP patients, it could mean that hospitals are learning from their experiences with HRRP patients to improve readmission performance for all patients more broadly.

The HRRP is still early in its implementation, and, over time, researchers will be able to better understand whether financial penalties have a significant positive impact on patient outcomes. However, this early evidence shows some signs that the HRRP is driving quality improvement and helping to save money in the long run.

 

Article Source: Readmissions to New York Hospitals Fell for Three Target Conditions from 2008 to 2012, Consistent with Medicare Goals, Carey and Lin, Health Affairs, June 2015, 34(6): 978-985.

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