Are You Ready for the New Era of Driving Value in Medicare?

The new era of promoting greater accountability and value in Medicare has arrived. For health system executives, the arrival of this new era means that their focus has to broaden beyond just the health system's own performance. They now need to take in continuity of care in ways that are unprecedented.

Starting in October, when the Medicare Hospital Readmissions Reduction Program goes into effect, CMS will hold providers responsible for quality of care delivered across the continuum, placing a premium on the ability of providers to coordinate care across different stakeholders within a community. To succeed, hospitals must take a thorough look at their ability to manage resource utilization in general — and readmissions in particular — in this new era of quality measurement, pay-for-performance and provider-based risk management.

According to MedPAC, nearly 1 in 5 Medicare patients discharged from the hospital is readmitted within 30 days, at a cost of over $15 billion annually. The HRRP encourages hospitals and post-acute care providers to enhance care coordination by lowering payment rates for hospitals with greater-than-expected readmission rates for three conditions: acute myocardial infarction, heart failure and pneumonia. In 2013, the maximum payment reduction will be 1 percent, rising to a maximum of 3 percent in FY 2015 and beyond.
For those who don't think the penalties are that stiff, think again. Beginning in FY2015, payment reductions will apply to even more conditions: chronic obstructive pulmonary disease, coronary artery bypass graft, percutaneous transluminal coronary angioplasty and other vascular conditions.

To manage and reduce readmissions moving forward, hospitals and acute care providers must:

Measure. Above all, hospitals must know their own readmission rates and the patterns of readmissions arriving from post-acute care providers in their markets. Equally important, hospitals must develop capabilities to evaluate readmission patterns, including how quickly discharged patients are readmitted, from what setting and for what reason and what patient characteristics put them at higher risk of readmission than others.

Design and document. Hospitals must track and document changes in readmission rates on a regular basis, design programs to reduce preventable readmissions and evaluate their effectiveness. In particular, hospitals need to target their efforts on patients most likely to be re-hospitalized.

Collaborate. Smart post-acute and community care providers will recognize the potential for increased volume will only come if they can demonstrate their ability to assist hospitals in efforts to reduce unnecessary readmissions. Hospitals, in turn, will need to develop new, metric-driven relationships with post-acute care providers.

An Avalere analysis of one hospital's discharge and re-hospitalization patterns using 2009 Medicare data highlights important issues all hospitals should consider in deciding how to invest resources when developing a care coordination strategy. The hospital, located in the Chicago MSA, discharged 381 AMI, heart failure and pneumonia cases in 2009. Of these, patients went to a total of 47 skilled nursing facilities. The four skilled nursing facilities with the highest volume of referrals from the hospital had readmission rates ranging from 29 to 41 percent, and readmission rates did not correlate with patient volume.

Such a vast array of skilled nursing options presents a hospital with a nearly impossible management challenge; it is very difficult to coordinate, communicate and establish resource collaborative arrangements with so many partners. Collaboration will demand focus and a winnowing down to a select set of preferred partners. One of the most important steps a hospital can take is to identify these partners who share the same vision of success.

Communicate. Once partnerships are in place, it is essential that hospitals communicate to their staff and to provider partners the programs and protocols being put in place to reduce readmissions. In this new era of accountability, they must be willing to share results with internal and external stakeholders on a continuous basis.

Taking these steps will help hospitals plan for what is around the corner. However, the day is coming where accountability will span the entire spectrum of care. Hospitals that want to be successful must take the lead in managing clinical and financial risk across rehabilitation and skilled nursing, home care, assisted living and residential care, and hospice and palliative care settings.

Erik Johnson is a senior vice president with Avalere Health, focusing his practice on healthcare delivery reform, payment reform, hospital operations and finance. For more information, you can reach Mr. Johnson at (202) 207-3464 or ejohnson@avalerehealth.net


More Articles on Reducing Hospital Readmissions:

3 Must-Haves to Reduce Hospital Heart Attack Readmission Rates
Bringing Pharmacists to the Patient's Bedside: How Mercy Health Reduced Readmissions by 20%
Tips for Reducing Hospital Readmissions for Heart Failure Patients

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