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More equitable penalties with adjusted Hospital Readmission Reduction Program

May 14, 2019

By Will Boggs MD

NEW YORK (Reuters Health) - The distribution of penalties appears to be more equitable with the new peer-group-stratified payment-adjustment method in the Hospital Readmission Reduction Program (HRRP), according to a retrospective study.

"Over 90% of hospitals caring for socioeconomically disadvantaged patients were subject to penalization under the Hospital Readmission Reduction Program prior to this policy change," Dr. Cian P. McCarthy from Massachusetts General Hospital and Harvard Medical School, in Boston, told Reuters Health by email. "After an effective policy modification, 14% of these hospitals, who would previously have been penalized, avoided financial correction this year."

The HRRP aims to lower Medicare and Medicaid expenditures by reducing the burden of preventable repeated hospitalizations within 30 days while simultaneously improving the quality of postacute care. Risk-adjustment models used to determine hospital penalty status did not account for socioeconomic status, so penalties disproportionately affected institutions serving low-income populations (so-called safety-net hospitals).

Beginning in fiscal year 2019, a new peer-group-based payment-adjustment method was introduced to account for socioeconomic status of patients cared for within hospital systems, using the proportion of patients eligible for both Medicare and full-benefit Medicaid as a surrogate measure of socioeconomic disadvantage.

Dr. McCarthy and colleagues evaluated whether the new, stratified payment-adjustment method altered the distribution of penalties among 3,173 hospitals included in the HRRP by comparing penalty status for fiscal years 2018 and 2019.

Using the old method, 79.07% of hospitals would be subject to penalties for fiscal year 2019, but the new method resulted in a net down-classification in penalty status for all hospitals to 75.04%.

The new peer-group-based method up-classified 2.80% of hospitals to a penalty status and down-classified 6.83% to a nonpenalty status, the researchers report in JAMA Network Open, online April 26.

Down-classified hospitals were more commonly nonteaching and physician-owned hospitals, located in rural regions, with fewer hospital beds, less fully implemented electronic medical records, and limited cardiac-surgery and percutaneous coronary intervention (PCI) capabilities.

Hospitals up-classified to a penalty status were more likely to be teaching hospitals, participate in bundled-payment programs, and have cardiac surgery, PCI, and cardiac-rehabilitation capabilities.

Among hospitals classified in the lowest socioeconomic-status quintile, 91.64% would have been subject to penalties in fiscal year 2019 using the old method, compared with 77.60% using the new method. The median net penalty payment decreased from 0.46% in fiscal year 2018 to 0.28% in fiscal year 2019.

Even hospitals higher quintiles experienced a small net down-classification in penalty status from 75.94% with the old method to 74.40% with the new method. Their median net penalty payment increased modestly from 0.32% in fiscal year 2018 to 0.35% in fiscal year 2019.

Patterns of reclassification were similar among hospitals in states that did and did not adopt Medicaid expansion during the study period.

"As patients of socioeconomic disadvantage often lack social support, access to certain medications due to prohibitive drug costs, and have poorer living environments, hospitals that care for low-income patients often struggle on many hospital performance measures, such as readmission rates, due to socioeconomic factors which are not under their control," Dr. McCarthy explained.

"Consequentially, the Hospital Readmission Reduction Program previously disincentivized hospitals from taking care of such patients due to the financial penalties that may accrue from their readmissions," he added. "Findings from our study suggest that the new changes to the program may contribute to a more socially equitable implementation of readmission penalties, thereby reducing this concern."

"As the Centers for Medicare and Medicaid Services (CMS) continue to implement health policies in an attempt to improve the quality of patient care and curb rising Medicare expenditure, it will be crucial that they adjust for socioeconomic status to ensure an equitable distribution of penalties," Dr. McCarthy said.

Dr. Karen Joynt Maddox from Washington University School of Medicine in St. Louis, Missouri, who has done similar research, told Reuters Health by email, "This is the first time that CMS has included social risk factors in a pay-for-performance program, which has really important implications for future payment programs. It represents an acknowledgement from CMS that social risk factors - like poverty - have a powerful influence on clinical outcomes and need to be accounted for in order for these programs to be fair."

"This is a great first step by CMS, but more work is needed to fully account for social risk across other measures and programs," she said. "Additionally, it is important that these changes to the program affirm, rather than dampen, clinicians' dedication to addressing social risk factors in order to improve clinical outcomes for their patients."


JAMA Netw Open 2019.

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