No, hospitals aren't gaming readmissions with observation claims, HHS says

(Story updated at 7:15 p.m. ET)

Fewer patients are returning to the hospital within 30 days of discharge, and it's not because hospitals are holding patients in observation units instead of admitting them as a means of avoiding penalties, according to new federal data.

Readmission rates dropped significantly for more than 3,300 U.S. hospitals between 2007 and 2015. A small increase in the number of Medicare observation claims was also seen at that time. But researchers say the changes in observation stays can't account for the drops in readmission rates.

The trends, rather, imply changes in the organization of care that are consistent with hospitals' responding to the penalties imposed under the Affordable Care Act, according to .

"Several recent articles have questioned whether hospitals are avoiding readmission penalties by changing the way those who return to the hospital are classified instead of actually taking steps to improve care and reduce avoidable readmissions," Wednesday. "The new research shows that this isn't the case."

Hospitals began facing financial penalties for having high numbers of 30-day readmissions in 2010, when the federal Hospital Readmission Reduction Program took effect. Health policy analysts worried, however, that the pressure to avoid those fines could result in patients being held longer than necessary in observation units, areas meant for short-term care that are coded as an outpatient admission.

In a in October, AARP policy analysts said at least some hospitals are substituting observation status for inpatient readmissions, both for Medicare and privately insured patients.

The AARP analysts said the trends raise a number of questions about whether patients get the same quality of care, whether the drops in readmission rates truly mean hospitals are providing better quality, and if treatment under observation could mean denial of coverage for a patient's necessary follow-up care.

Dr. Steffie Woolhandler, a professor at the City University of New York's School of Public Health has also written about how federal programs may incentivize hospitals to become “good at cheating.” She feels the NEJM study authors over-interpret their statistical findings and offer false reassurance about the potential for gaming.

The new study's authors, including two policy analysts who work for HHS' Office of the Assistant Secretary for Planning and Evaluation, say the upward trend in observation claims may be driven by factors that are largely unrelated to the 30-day readmission program, “such as confusion over whether an inpatient stay would be deemed inappropriate by Medicare recovery audit contractors.”

The fact that observation hospitalizations rose in the years before the penalties went into effect does not disprove gaming, Woolhandler countered. “Confusion usually clears up, especially when large amounts of money are involved.” So the fact that hospitals continued to increase observation stays throughout the period still begs for explanation.

She also says the study does not consider other types of gaming, such as hospitals exaggerating the patients' severity of illness, which would reduce the readmissions rate, or providing complex therapies in the emergency departments to avoid readmission.

“Some hospitals are no doubt doing the hard work of helping patients stay out of the hospital,” she argued. But many are likely gaming the readmissions penalties."

The ASPE researchers, along with colleagues at Brigham and Women's Hospital, Boston, and Harvard Medical School, examined changes in readmission rates and stays in observation units from October 2007 through May 2015 before and after the 30-day readmission reduction program was implemented.

They looked at targeted therapies, such as heart attack, pneumonia and heart failure, and general conditions to assess whether hospitals that had greater increases in observation claims also had greater reductions in readmissions.

The percentage of patients held in observation increased from 2.6% in 2007 to 4.7% in 2015 for targeted therapies, and 2.5% to 4.2% for general therapies. At the same time, readmission rates for targeted conditions declined from 21.5% in 2007 to 17.8% in 2015, and went from 15.3% to 13.1% for non-targeted therapies.

The findings are exciting, said cardiologist Dr. Harlan Krumholz, director of the Center for Outcomes Testing and Evaluation at Yale-New Haven Hospital, even though questions will continue to swirl around the readmission measures and more research is needed to fully understand how the industry is responding.

The drop in readmissions reflects the success of a process that emphasized a problem that could be measured, supported improvement on that problem with policy and yielded few unintended consequences for patients. “It validates the idea that we can stimulate attention to a largely ignored issue, galvanize action and create change,” he said. “The point is, hospitals weren't improving on their own.”

But Krumholz also warned against becoming complacent. While readmission rates may be dropping, only a quarter of more than 3,400 hospitals avoided penalties in the latest round. As one health economist put it when the data was released in August, “Everyone sucks.” With fines ranging from 0.01% to 3% of base operating DRG payments, the CMS estimated Medicare would save $420 million in 2016.

Getting fined despite improvements may create a sense of futility and dampen hospitals' efforts, Krumholz said.

The NEJM study notes that the most rapid declines happened before October 2012, two years after the readmissions reduction program took effect, and that reductions continued after that, though at a slower pace. “Presumably, hospitals made substantial changes during the implementation period,” the authors wrote, “but could not sustain such a high rate of reductions in the long term.”

Health policy researchers and industry groups representing U.S. hospitals also continue to argue that many factors affecting whether a patient needs to be readmitted are beyond a hospital's control. In particular, facilities in poor communities may be unfairly penalized, some of the program's critics say.

Understanding which factors are within a provider's control and how to adjust for these factors in value-based payments remains fuzzy, concluded a January report from the National Academies of Sciences, Engineering and Medicine.

Sabriya Rice

Sabriya Rice reports on quality of care and patient-safety issues. Rice previously wrote and produced for the medical unit of CNN, where she contributed to the Empowered Patient column and the weekly medical program formerly called “Housecall with Dr. Sanjay Gupta.” She earned a bachelor's degree in film and television from the University of Notre Dame and a master's in communication studies from the University of Miami in Coral Gables, Fla. She joined Project Japan in 2014.



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