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Reducing readmissions: It's harder than it looks

September 12th, 2012

by Jonathan H. Burroughs

A centerpiece of the Center for Medicare & Medicaid Services' efforts to enhance the value of healthcare is to reduce preventable hospital readmissions. The volume and cost of these readmissions is significant.

According to the Institute for Healthcare Improvement, of the 5,000,000 U.S. hospital readmissions, approximately 76 percent are preventable, at an annual cost of $25 billion.

As of 2012, under section 3025 of the Patient Protection and Accountable Care Act, hospitals receiving inpatient prospective payment by Medicare are penalized 1 percent for high rates of avoidable readmissions with the three highest diagnosis-related groups (DRG) of congestive heart failure, acute myocardial infarction and community-acquired pneumonia--and this penalty is projected to increase.

CMS also will publish the rate of avoidable readmissions of these three DRGs for all U.S. healthcare organizations as a part of its Hospital Compare website. This website is of great interest to third-party payers who create tiered networks of preferential referrals and modulation of premium costs based upon high performance and low cost, thus significantly impacting a healthcare organization's market share.


So there is an urgent mandate to reduce avoidable hospital readmissions. Unfortunately, the solution is complex and requires a complete change in how we organize and incentivize our healthcare delivery system, both nationally and locally.

The following is a brief inventory of some of the necessary changes that must occur to significantly impact and reduce hospital readmissions:

1. Transition physician reimbursement from fee for service to capitation with incentives for value

Fee-for-service reimbursement is a vestige of a piece work cottage industry in which higher volumes equates to better care and higher reimbursement. The new paradigm of providing value-based services that incorporate evidence-based medicine with high levels of service at optimum cost does not lend itself to traditional reimbursement methodologies and must transition to a capitation system (per covered life) with appropriate incentives for quality, service, safety and cost. Optimum patient outcomes must be supported by optimum payment methodologies that encourage physicians to do the right things for the right people at the right time.

2. Create significant financial incentives for management to invest in a disease management infrastructure

Equally important is to incentivize healthcare organizations to keep patients healthy and not merely to provide disease-related services. The current DRG reimbursement methodology rewards organizations that take care of a higher number of patients with defined conditions and provides little incentive for the organization to continue its care of patients following discharge, where it can have the greatest impact on potential long-term outcomes and readmissions.

There are few financial incentives for management to investment in a robust disease management program once the patient is discharged to assure patients receive good follow-up care, good handoffs to community practitioners, or good home-based care and teaching, all of which are key preventive tactics for readmissions. The reimbursement system should provide capitated incentives to keep the patient healthy post-discharge and for the healthcare organization to spend the same care and resources on ambulatory as it does on inpatient care.

3. Implement rigorous disease management for high-risk populations

According to CMS, 5 percent of Medicare beneficiaries make up 35 percent of its costs, and the rate of readmissions is 50 percent higher for uninsured and Medicaid patients than for privately insured individuals. Thus, to make a significant dent in readmissions, healthcare organizations will need to identify the small percent of our population that take up a disproportionate share of healthcare costs.

This requires a more intensified disease management program for individuals with significant chronic disease (e.g. chronic obstructive pulmonary disease, congestive heart failure, diabetes, etc.) that is disease specific and focused on keeping selected individuals with specific co-morbidities as healthy as possible. An investment in these individuals will significantly reduce the cost of care.

4. Horizontally integrate case and risk management beyond the hospital's walls

For healthcare organizations to properly care for individuals post-discharge, they may need to invest in community-based infrastructure that includes: home healthcare services, nursing homes, free clinics and patient registers with case management so that these services are reliably available upon discharge.

Too often, these resources have finite capacity or are simply not available and the patient must fend for him- or herself with little support. Just as hospitals used to fund and build nursing schools to provide a steady influx of qualified nursing graduates, today they must build a community infrastructure to be horizontally integrated to provide evidence=based preventive services throughout the continuum of care.

5. Utilize evidence-based pathways both in and out of the hospital

The National Quality Forum, the Institute for Healthcare Improvement and the Agency for Healthcare Research and Quality all have demonstrated that applying evidence-based approaches to commonly occurring conditions reduces the cost and optimizes the quality of care. Today, there is little resistance to utilizing these practices on hospitalized patients; however, clinical pathways still are not consistently used in the ambulatory setting where it is more difficult to track and monitor patients.

Current reimbursement methodologies encourage comprehensive case management in a hospital setting, but do not yet incentivize organizations to continue the same rigor post-discharge where patients often relapse due to poor compliance or psycho-social factors that impact the timely and appropriate delivery of care.

Look for part 2 of the post in the Sept. 20 newsletter.

Jonathan H. Burroughs, MD, MBA, FACHE, FACPE is a certified physician executive and a fellow of the American College of Physician Executives. He is president and CEO of The Burroughs Healthcare Consulting Network and works with some of the nation's top healthcare consulting organizations to provide "best practice" solutions and training to healthcare organizations.


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