Readmissions and How They Affect Payments

Some flareups may lead to readmissions within 30 days.

We can all agree that we want to fully treat our patients’ acute problems that require inpatient hospitalization, allowing them a safe discharge and optimizing their health, doing our best to ensure that readmission won’t happen. Seems reasonable.

As healthcare improves, patients will be managed more in the outpatient arena – and live longer, accumulating chronic conditions. Medicare knows that during hospitalization, we aren’t resolving chronic diagnoses, which may be lurking and have the potential to reappear. Some flareups may lead to readmissions within 30 days, costing $16,000 on average, per patient, as noted by Weiss and Jiang in 2018.

According to Stephenson, writing in 2019, the major causes of readmissions are disengagement or noncompliance, condition complications, inadequate transitions, misinterpretation of instructions, and demographic factors. Three out of the five causes lie within our circle of influence. No comment is made regarding how prioritizing patient preferences or demographics may affect readmissions. How many patients refuse skilled nursing or rehabilitation, only to fail at home and bounce back? How many choose a facility we know struggles to provide quality care? 

The Hospitalization Readmissions Reduction Program (HRRP) identified hospitals through a Hospital-Specific Report, targeting a few diagnoses (CMS.gov). MedPAC saw a dramatic reduction in readmissions between 2008, when almost 25 percent of Medicare patients were readmitted, and 2017: heart failure, heart attack and pneumonia readmission rates dropped 5 percent, as reported by Panagiotou, et al in 2019. Looking at similar diagnosis-related groups (DRGs), Medicare reduced future payments to 2,499 hospitals in 2021, making for an average penalty of a 0.64 percent, representing $217,000 for Medicare patients in 2022. Almost 80 percent of hospitals had some penalty. A total of 39 hospitals had the maximum 3-percent penalty (Rao 2021. Seems reasonable.

Under the guise of working with contracted hospital systems to improve population healthcare by sharing the risk, Medicare Advantage (MA) plans latched onto Medicare’s approach, but went further and treated readmissions as “never events.” However, insurers are not unbiased arbitrators. The U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) reported that 18 percent of MA payment denials were for claims that met Medicare coverage rules and MA Organization (MAO) billing rules, delaying or preventing payments for services that providers had already delivered.

How many of these denials impacted readmissions? It’s understandable to treat readmissions occurring on the same day as one inclusive admission. Hopefully, the admission with the higher DRG will be accepted. Hospitals must clearly define the difference between admissions, beyond just a different DRG. MA plans debate the medical necessity for admission, then stretch to define the care as a readmission. They emphasize any diagnoses on the problem list, chronic ones or recently managed acute ones. Recently, an MA plan tried to use continuing management of a GI bleed from a prior admission in order to deny a pyelonephritis with a stent and stone as a readmission, although the issue did not present during the prior admission. Hospitals must be hypervigilant about these attempts to seek to find cause for reclassifying an admission to close the gap on allowing readmission denials. However, contracted MA plans typically do not pay for readmissions, at any rate. This “classification” costs our facilities more than the Medicare penalty. Seems unreasonable.