Medicare Fines Record Number Of Hospitals For Excessive Readmissions

Hospitals lately have been getting better at ensuring their patients don't relapse shortly after they walk out the door. Nonetheless, Medicare this week began docking a record number of hospitals for having too many readmissions.

Over the next year, 2,610 hospitals will lose some of their payments for each Medicare patient they admit, Medicare records show. This is the third year the industry faces these penalties, which were created by the Affordable Care Act. This year potential fines are the highest: up to 3 percent of Medicare bills.

Boomerang patients have been a longstanding problem for hospitals. Even though rehospitalizations were less common last year, nearly 1 in 5 Medicare patients returned within 30 days, costing taxpayers $26 billion extra.

The penalties aren't just getting more harsh; they're also affecting more hospitals. Half of the hospitals in 29 states and the District of Columbia will be losing money. Those states include California, Florida, Georgia, Illinois, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Tennessee and Texas, according to a Kaiser Health News analysis of the penalties.

Only Maryland hospitals emerged unscathed, but that's because the state has a unique payment arrangement with the federal government.

There are some big names on the penalty list: Northwestern Memorial Hospital and Rush University Medical Center in Chicago, Beth Israel Medical Center in Manhattan, Tufts Medical Center in Boston and the nation's first hospital, the Pennsylvania Hospital, a major teaching facility. The hospital was co-founded in 1751 by Benjamin Franklin.

One reason the punishments are expanding is that Medicare is tracking more conditions. In addition to patients suffering from heart failure, heart attacks and pneumonia, this year Medicare analyzed readmissions of patients with elective hip and knee replacements and lung ailments such as chronic bronchitis. As a result, some hospitals that never faced fines before — including some specialized ones that concentrate on lucrative procedures — are now on Medicare's list.

Some hospitals are being punished for their past shortcomings, because the penalties are based on three years of patients starting in July 2010. But the industry is also a victim of its own successes. Medicare judges them against each other, so even many of those that have improved their rates of keeping patients from coming back are being fined.

"You have to run as fast as everyone else to just stay even," says Nancy Foster, vice president for quality at the American Hospital Association's quality. This is one of several reasons hospitals are griping about the penalties, along with the fact that in past years safety net hospitals have fared particularly poorly.

Around the country, many hospitals are replacing their perfunctory discharge plans—such as handing patients a paper with instructions —with more active efforts. Some now give low income patients free medicine and make sure they don't leave without having a follow-up appointment with a doctor scheduled. Others are sending nurses into their homes a few days later to see how they're doing. "This really fairly modest step" of penalties has "persuaded a lot of hospitals to talk in ways they simply were not talking 10 years ago," says Dr. Stephen Jencks, a consultant who was one of the first researchers to document the nation's high readmission rates.

But some hospitals may not be trying too hard, because readmissions are good for the bottom line even if they're bad for patients. "It's a quagmire," an anonymous hospital official was quoted as saying in a study published this month in The Joint Commission Journal on Quality and Patient Safety. "If you affect the population correctly, you will reduce both readmissions and overall admissions, which is good for the patient but financially bad for the hospital."

KHN is an editorially-independent program of the Kaiser Family Foundation.