Hospitals face record penalties as CMS expands criteria for readmissions fines

By Elizabeth Whitman  | August 3, 2016

The CMS released a slew of revisions Tuesday to how it will pay hospitals in its fiscal 2017, which begins in October. Under those changes, thousands of hospitals will see an increase in penalties for 30-day readmissions.

Those penalties would save Medicare an estimated $538 million, or an increase of about $108 million over the previous year, the agency said, even as it projected that its total spending on inpatient hospital services would increase by about $746 million in the coming fiscal year.

Since October 2012, the Hospital Readmissions Reduction Program has required CMS to cut payments to applicable hospitals that see the return of an excessive number of patients within 30 days after discharge for specified conditions.

The CMS estimated that it would penalize 2,588 hospitals for excessive readmission rates for the coming fiscal year. It does so by reducing Medicare payments to hospitals whose readmission ratios exceeded the national average, although it limits those penalties to 3%. The rule applies to about 3,330 acute-care hospitals and 430 long-term acute-care hospitals, the CMS said. Other facilities, like psychiatric hospitals, critical access hospitals and children’s hospitals, are excluded.

In announcing the changes, the CMS touted “a commitment to increasingly shift Medicare payments from volume to value.” The administration’s goal of linking half of all Medicare payments to quality over quantity by 2018 has also spurred other shifts, such as bundled payments for certain medical procedures, that have fueled discussion and, often, controversy, within the industry over whether and how to adjust for hospitals that serve disproportionate numbers of sicker patients.

“We are disappointed CMS missed another opportunity to adjust for the social and economic challenges of vulnerable patients in its quality improvement and reporting programs,” Beth Feldpush, senior vice president of policy and advocacy at America’s Essential Hospitals, an association for safety net hospitals, said in a statement. “The evidence is clear that these programs disproportionately penalize hospitals that serve disadvantaged patients and communities,” she added.




Drue is Managing Partner for The De Angelis Group.

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