New Medicare reimbursement rules provide some relief to safety-net hospitals, shifting the burden of financial penalties toward hospitals serving wealthier patient populations, according to a new study.
The new rules also reduce the burden of such penalties on hospitals in states that have more generous Medicaid programs.
In an effort to reduce health-care costs, Medicare issues financial penalties via the Hospital Readmissions Reduction Program to hospitals with higher than expected readmission rates. Critics have faulted the program—which can cut a hospital’s Medicare reimbursements by up to 3 percent—for unfairly penalizing so-called safety-net hospitals that serve the poorest patients, who are more likely to face readmission for reasons beyond the hospital’s control.
“The new rules recognize the reality that it is harder to prevent readmissions when people don’t have stable housing or social support…”
Rather than comparing all hospitals directly, the new rules divide hospitals into five groups according to the proportion of their Medicare patients who have also enrolled in Medicaid, a program intended to help the poorest patients. The new rules then only compare hospitals to their peers that treat similar proportions of disadvantaged patients.
Across the five groups of hospitals, the average proportion of patients dually enrolled in Medicare and Medicaid ranged from a low of 9.5 percent to a high of almost 45 percent.
“The new rules recognize the reality that it is harder to prevent readmissions when people don’t have stable housing or social support,” says cardiologist Karen Joynt Maddox, the study’s first author and an assistant professor of medicine at Washington University School of Medicine in St. Louis.
“If you have patients who struggle to put food on the table, it’s going to be tougher for them to manage their end-stage heart failure. The old system took money away from hospitals that serve the most vulnerable patients. It created a significant disincentive to provide health care to poor people, and that’s the last thing we want.”
Looking at the most recent data the Centers for Medicare & Medicaid Services published, the researchers calculated and compared the penalties under the old and new reimbursement rules for just over 3,000 hospitals nationwide. Using the published data, the researchers projected how the penalties will shift by comparing projected penalties under the new rules to what they would have been under the old rules.
Under the new rules, researchers project penalties for the hospitals serving the fewest poor patients to increase more than $12 million in total. Meanwhile, they expect penalties for the hospitals serving the highest proportion of poor patients to decrease by more than $22 million in total. On an individual hospital level, the changes should range from an increase in penalties of $225,000, to a decrease of $436,000.
Large hospitals and teaching hospitals are the most likely to see reduced penalties. The researchers also found reduced penalties among hospitals serving patients from the most disadvantaged neighborhoods and those serving the most patients with disabilities. Hospitals in states with more generous Medicaid enrollment also fare better than those in states with fewer poor patients enrolled in the Medicaid program.
“Making the program more fair doesn’t take away from its goal…”
“States differ widely in the percentage of people living in poverty who are able to enroll in Medicaid,” Joynt Maddox says.
“Since the new rules, as written by Congress, only give credit to hospitals for treating patients on Medicaid and not poor patients in general, the states with more people enrolled in Medicaid are going to benefit more from the new system.”
According to Joynt Maddox, the magnitude of the state and regional differences in the shift in penalties surprised researchers. The results showed more penalties for hospitals in the South and Midwest and fewer penalties for hospitals in the West and Northeast. California, which has generous Medicaid enrollment, had the most reduced penalties. Meanwhile, South Dakota and Florida, two states with fewer poor patients enrolled in Medicaid, had the greatest increases. Overall, differences in state Medicaid enrollment could explain much of the shift in penalties between states.
“This was a positive change for the [Hospital Readmissions Reduction Program],” Joynt Maddox says.
“Making the program more fair doesn’t take away from its goal, which is to use financial incentives to make hospitals think differently about care beyond their walls. Hospitals are increasingly working to provide a soft landing, including discharge planning and communication with outpatient-care providers.”
Still, Joynt Maddox says there is work to be done, even if the new rules more fairly consider the socioeconomic reality of hospitals’ patient populations.
“There are still marked disparities in readmissions related to social determinants of health,” she says. “We need to find innovative solutions to improve outcomes for our most vulnerable patients after they leave the hospital.”
The study appears in JAMA-Internal Medicine. Additional researchers from Washington University, the Missouri Hospital Association, and the Henry Ford Health System in Detroit also contributed to the study. The National Institutes of Health and the Washington University School of Medicine Office of Medical Student Research Dean’s Fellowship provided support for the research. Joynt Maddox reports intermittent contract work for the US Department of Health and Human Services.
