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Fixing Patients the First Time Holding Health Care Costs Down

New York hospitals face steep revenue cuts for readmissions that are preventable.

November 16, 2012
Related Topics: Health Care Costs, Health and Wellness, Policies and Procedures, Latest News
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Three years ago, NYU Langone Medical Center noticed a problem. Half its patients who were readmitted to the hospital less than 30 days after undergoing knee replacements did so primarily because of infections.

NYU Langone doubled down on hand-washing, screened all incoming patients for staph germs and scrubbed rooms super-clean to short-circuit infections. Today, every surgeon has a scorecard that tracks readmission rates. The upshot: Readmissions after knee-replacement surgery are down by half since 2009.

The hospital is fine-tuning its -approach.

"We're working to construct a computer model to predict who is at greatest risk for readmission," said Dr. Joseph Bosco, vice chair for clinical affairs in orthopedic surgery. "We're going to make sure they get good follow-up."

It was a critical discovery, not just for patients, but also potentially for the hospital's bottom line. Government and private health insurers are tired of paying for medical care that doesn't make patients healthy. Last month, the Centers for Medicare & Medicaid Services began penalizing hospitals that have excessive readmissions for three conditions: pneumonia, heart attacks and congestive heart failure. CMS will dock them as much as 1 percent of their total Medicare reimbursements, rising to 3 percent in 2015. Right now, orthopedic surgeons, such as those at NYU, don't have to worry about readmission penalties, but in 2014 CMS is expected to add four new diagnoses to the penalty list and likely more as time goes on.

The CMS program is one of the first steps in a broad effort, made more urgent by federal health care reform, to improve patient care and bring down costs by holding hospitals accountable for the quality, and not just the quantity, of their care. How far the penalties will go remains a question. Some private insurers already negotiate reimbursement rates based partly on readmissions, and in 2008 Medicare stopped paying for extra costs to treat hospital-acquired infections. California last summer started assessing civil penalties against hospitals for medical errors, and the White House floated a proposal in September for a pilot project that would ask patients to report mistakes by physicians and other providers.

Hospitals in New York state stand to lose 0.55 percent of Medicare reimbursements based on 2010 readmissions, nearly twice the national average of 0.31 percent. New York City hospitals will fare worse. In 2008, they accounted for 47 percent of readmissions in the state and 55 percent of readmission costs, according to a study by the New York State Health Foundation. They will lose an average of 0.71 percent in reimbursements in 2013.

Threatened with lost revenue, hospitals in the city are trying to prevent unnecessary readmissions. Organizations concerned about health care costs and quality are funding studies and pilot projects to help hospitals figure out how. Nationally, 20 percent of Medicare patients are readmitted within 30 days, costing the federal government $15 billion a year.

"It's rule No. 1 of cost containment," said James Tallon, president of the United Hospital Fund. "It's part of a future in which health care is no longer focused on an individual visit, an individual admission or paying for a unit of services—it's looking at patients over a longer period of time."

Financial incentives under Medicare's fee-for-service system are still rigged in favor of the short term: the more patients admitted, the more revenue hospitals bring in. Attempts to reduce admissions often require additional and unreimbursed resources. For example, hospitals may have to hire additional personnel to keep track of whether patients are taking their medicine after they go home. Savings, meanwhile, go to Medicare, private insurers or the patient. Hospitals want a cut, and CMS and private insurers are experimenting with models that pay providers for managing patient care long-term. For now, though, the fee-for-service structure predominates.

"We have to find other models," said Dr. David Cohen, vice chair of medicine at Maimonides Medical Center in Brooklyn.

New York is almost a poster child for the growing cost of readmissions. In 2008, nearly 15 percent of initial hospital stays resulted in readmissions, at a cost of nearly $4 billion, or 16 percent of total hospital costs, according to the New York State Health Foundation study.

In many cases, preventing readmissions seems like common sense, such as making sure patients take their medicine and arrange follow-up appointments with their doctor after leaving the hospital. But it's no small task in a city where care is fragmented, hospitals have to give discharge instructions in a dozen or more languages, and the poor and elderly may be unable to get to a doctor or pay for medications. When patients can't or don't comply, hospitals haven't traditionally seen it as their job to follow up. They complain that CMS penalizes them for readmissions unrelated to the original hospitalization.

"What the readmission program has done is extend the responsibility of the hospital beyond the four walls to post-discharge," said Lorraine Ryan, senior vice president of the Greater New York Hospital Association, which has been working with hospitals to implement fixes.

As a result, many hospitals have revamped their approach. Brooklyn Hospital Center, which will lose the maximum 1 percent of reimbursements in 2013, found that more than 50 percent of readmitted patients didn't see a physician after discharge. Now the hospital reminds patients by phone or books a doctor's appointment. The hospital involves a pharmacist in discharge planning when patients are on multiple medications. Heart-attack readmissions dropped from 15.2 percent in 2010 to 12.2 percent in the first quarter of 2012.

"Now we know that if a patient is taking nine or 10 medications, we have to pay attention," said Chief Quality Officer Dr. Vasantha Kondamudi.

Some readmitted patients also may have psychiatric or addiction issues, or are homeless. Maimonides in Brooklyn which will be docked 1 percent of reimbursements next year, now coordinates a patient's post-discharge clinical, psychiatric and social needs. The readmission rate for these patients has dropped by 50 percent over the past three years.

New York Methodist Hospital in Brooklyn found that half of patients with congestive heart failure who went to nursing homes after treatment returned to the facility. Methodist, which will lose 1 percent next year, streamlined its discharge instructions and, with a federal grant, created a partnership with nursing homes, home health agencies, social-service agencies and a physician service that makes house calls. In the first quarter of 2012, readmissions for those patients were 13 percent, down from 50 percent in 2009.

Many of these programs are being funded by CMS and foundations, but ultimately the hospitals will have to absorb the cost of additional resources and personnel even as they lose money they would have made on readmissions.

One tactic is an emphasis on outpatient services. The city's Health and Hospitals Corp., for example, is growing its primary-care network and has expanded its telehealth initiative for diabetic patients. It also has hired 40 people in recent months to coordinate inpatient care. Two of its hospitals have some of the lowest penalty rates in the city.

"There are some readmissions that occur despite the best of care," said HHC Chief Medical Officer Dr. Ross Wilson. "We want to make sure we don't keep sick patients out of the hospital who need to be there, but we need to make sure we don't waste resources."

Judith Messina writes for Crain's New York Business, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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