Bloomberg News

Medicare Cuts for Readmissions to Target Large Hospitals

January 22, 2013

Large U.S. teaching hospitals such as those affiliated with major universities are more likely to be penalized under a U.S. program linking Medicare pay cuts to higher rates of patient readmission, research suggests.

About 67 percent of 3,282 hospitals studied will receive lower payments for providing care to patients in Medicare, the U.S. government’s health program for the elderly and disabled, as a result of the policy that took effect on Oct. 1, according to a research letter published today in the Journal of the American Medical Association. Major teaching hospitals are more likely to be highly penalized, which the authors define as being in the top half of penalized hospitals.

Data from July 2008 to June 2011 will be used to determine if readmission rates are higher than predicted for patients with heart attacks, pneumonia and other ills. Hospitals with higher rates will receive a Medicare cut of as much as 1 percent. The penalties may cost hospitals about $280 million this year, the government has estimated.

While the current penalties “may be modest for some hospitals, they may represent substantial financial shortfalls for hospitals operating on low profit margins,” wrote Karen Joynt, a cardiologist at Boston-based Brigham and Women’s Hospital (0178523D:US) and lead author of the letter.

Community Health Systems Inc. (CYH:US) and LifePoint Hospitals Inc. (LPNT:US) may face the biggest reductions in payments in fiscal 2013 among for-profit hospital companies, CRT Capital Group LLC reported in September after analyzing 2012 government data.

Medicare Costs

The initiative is among the Medicare changes aimed at saving billions of dollars under the Affordable Care Act, which will cost $828 billion through fiscal year 2019 by expanding health insurance coverage, according the Centers for Medicare & Medicaid Services. While the initial cuts may be small, they’re due to increase in future years, the research letter found.

Prior studies suggest patients served by large hospitals have more complex medical conditions, leading to higher readmission rates, Joynt wrote. The rate also may be linked to the patients’ socioeconomic mix, she wrote.

“There is less evidence that differences in readmissions are related to measured hospital quality,” she wrote.

So-called safety net hospitals, which provide a large amount of care to low-income and uninsured patients, also are more likely see payment cuts under the initiative, the research found.

Forty percent of large hospitals will be highly penalized compared with 28 percent of small hospitals, the research suggests. The authors defined large hospitals as those with 400 or more beds.

About 45 percent of safety-net hospitals are likely to be highly penalized compared with 30 percent of hospitals that don’t serve a significant number of low-income and uninsured patients, based on the findings. About 20 percent of safety-net hospitals won’t be penalized, the authors said.

To contact the reporter on this story: Stephanie Armour in Washington at sarmour@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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Companies Mentioned

  • CYH
    (Community Health Systems Inc)
    • $55.93 USD
    • 2.61
    • 4.67%
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