According to federal data cited by Kaiser Health News, in 2021 CMS will penalize 2,545 hospitals for having too many Medicare patients readmitted within 30 days. This accounts for nearly half of the nation's hospitals, but when one accounts for critical access hospitals or others exempted by Congress, such as those that specialize in psychiatric patients, children, veterans, rehabilitation or long-term care, 83% received a penalty.
To determine the readmission penalties, CMS looked at 30-day readmission rates for patients who had been treated for certain conditions:
- Chronic obstructive pulmonary disease (COPD)
- Coronary artery bypass graft surgery (CABG)
- Heart attack
- Heart failure
- Hip or knee replacement
The maximum penalty for fiscal 2021 is a 3% cut in payment for each Medicare patient, which will affect 39 hospitals. The average penalty across hospitals will be a 0.69% payment cut for each Medicare patient.
These penalties can be costly to a hospital, but their financial issues are exacerbated by the impact of COVID-19 pandemic. An analysis from Moody's predicts a negative outlook for not-for-profit hospitals, expected to see major cash flow issues in 2021 due to lower patient volumes, rising expenses and worsening payer mix. Moody's indicates median absolute levels of operating cash flow could drop 10% to 15% in 2021 compared to the third quarter of 2020.
“Revenue growth will be outpaced by expense growth, which will also weigh on [operating cash flow],” the report said. “This would be particularly true if hospitals continue to see high levels of COVID-19 hospitalizations in 2021.”
Akin Demehin, director of policy at the American Hospital Association, added, "It's unfortunate that hospitals will face readmission penalties in fiscal year 2021. Given the financial strain that hospitals are under, every dollar counts, and the impact of the penalty is significant."
However, Moody's says larger and more diverse health systems will be in a better position to handle the financial crisis. For-profit hospitals should see volumes recover from 2020 levels, with adjusted admission rates growing around 4% and net revenue per adjusted admission growing 0-1%. However, profit margins will be challenged in the COVID environment as PPE is purchased at significantly inflated prices and communities defer some medical care while high unemployment causes adverse payer mix shifts (e.g., an increase in Medicaid).
Net, “Large, multi-state systems and/or those with strong cash cushions will be better positioned to resume growth and capital spending,” Moody’s said. “Smaller standalone hospitals will like consider partnerships, accelerating [mergers and acquisitions].”
Reducing Hospital Readmissions
Reducing unnecessary hospital readmissions can help deaden the negative financial impact facing hospitals, not to mention improve health outcomes for the millions of patients who would benefit. The resources and coordination needed can be complex, but there are solutions that simplify this process and deliver outstanding results.
For example, PatientBond offers a readmissions reduction package that engages patients with digital communications throughout their journey, from discharge through 30 days and beyond. Patients are educated using email, text/SMS and automated phone calls about the steps they need to take to enhance their likelihood of recovery, such as medication adherence, nutrition, exercise and many other relevant topics.
Each communication includes a patient response link to indicate whether they understand the content or to specify if they are experiencing symptoms that are risk factors for readmission. The care team monitors each patient's status from an online dashboard, which tracks patient response to all communications and highlights readmission risks for follow-up.
Underlying the program is a psychographic segmentation model, which personalizes all content to each patient's "health personality," or core health motivations, priorities and communication preferences. Messages and channel mix are designed to the individual patient's psychographic profile to enhance patient activation and adherence to care plans.
Using this approach, hospitals have seen as much as an 85% reduction in unnecessary hospital readmissions for conditions such as congestive heart failure, atrial fibrillation, COPD and even lumbar spinal fusion surgery.
This is a huge opportunity for hospitals seeking to reduce readmissions, whether to avoid CMS penalties or to simply fulfill their missions of delivering the highest quality care to their communities with the patient at the center of all they do. 2021 may pose a continued financial challenge for hospitals, but readmission penalties do not need to be part of the equation.