The penalties are going up in Medicare’s hospital readmission reduction program.

Starting on Oct. 1, hospitals could face up to a 2% cut in Medicare payments if their 30-day readmission rates for acute myocardial infarction, heart failure, and pneumonia are too high. The program started on Oct. 1, 2012, with a 1% cap on penalties.

The penalty increase was outlined in Medicare’s proposed fiscal year 2014 inpatient prospective payment system rule released April 26.

The proposal also outlines the government’s plans to expand the readmission reduction program to include two new readmission measures. Starting on Oct. 1, 2014, the program would also include readmissions associated with an acute exacerbation of chronic obstructive pulmonary disease, as well as readmissions for elective total hip or knee arthroplasty.

The inclusion of COPD for fiscal year 2015 was expected since that condition was specifically highlighted by Congress in the Affordable Care Act (ACA), which created the readmission reduction program. However, lawmakers had also recommended adding coronary artery bypass graft (CABG) surgery, percutaneous coronary intervention (PCI), and other vascular conditions, which are not included in the Centers for Medicare and Medicaid Services (CMS) proposal.

The reasons for the switch were largely due to cost and volume, according to the proposal rule.

In 2005, annual hospital charges totaled $3.95 billion for primary total hip arthroplasty and $7.42 billion for total knee arthroplasty. When combined, the two procedures represent the largest procedures cost in the Medicare budget. At the same time, inpatient admissions for PCI and other vascular conditions have been declining, according to Medicare officials, as more of those services are being shifted to hospital outpatient departments.

The fiscal 2014 payment proposal also includes a revised methodology for calculating hospital readmission rates in an effort to do a better job of accounting for certain planned readmissions.

The change is a mixed bag for hospitals, according to the Premier healthcare alliance. While the revised methodology will likely result in a more accurate payment calculation, it fails to take into consideration socioeconomic and community factors.

"Hospitals that serve high percentages of lower-income patients will be disproportionately penalized for circumstances outside their control," Blair Childs, senior vice president of public affairs at Premier, said in a statement. "This places additional financial burdens on already stressed local health care systems in these communities."

The Medicare program is also moving forward with the Hospital-Acquired Condition Reduction Program, also created by the ACA.

The new program, which begins on Oct. 1, 2014, levies a 1% penalty on hospitals that rank in the lowest-performing quartile for eight hospital-acquired conditions. The proposed rule includes the quality measures, scoring methodology, and correction process that are planned for the program.

During the first year, officials plan to use quality measures that are calculated using claims data or are part of the Inpatient Quality Reporting program. The eight measures are divided into two domains. Hospitals will receive a score for each measure, which will then be used to calculate a domain score. The two domains will be weighted equally to get a total score under the program, according to CMS.

The measures in the first domain are pressure ulcer rate; volume of foreign object left in the body; iatrogenic pneumothorax rate; postoperative physiologic and metabolic derangement rate; postoperative pulmonary embolism or deep vein thrombosis rate; and accidental puncture and laceration rate. CMS is also considering the use of a composite patient safety indicator measure set as an alternative to the first domain.

The second domain includes two health care–associated infection measures: central line–associated bloodstream infection and catheter-associated urinary tract infection.

CMS plans to account for risk factors such as age, gender, and comorbidities when calculating the measure rates.

There are no surprises in the conditions chosen for the new program, said Erik Johnson, senior vice president at Avalere Health. However, the fact that CMS officials chose to include eight measures at the start of the program indicates how serious they are about hospital-acquired conditions, he said.

Mr. Johnson predicted that hospitals will take these quality programs seriously as well. Through the combination of the hospital-acquired condition program, the readmission reduction program, value-based purchasing, and a few other programs, hospitals now have at least 7% of their Medicare payments at risk based on performance on quality measures, he said.

"It’s already starting to move behaviors," Mr. Johnson said. "Hospitals are by and large making a good-faith effort to get better at all of those things. But there are going to be winners and losers, and the losers may end up losing big on a lot of this stuff."

CMS will accept public comments on the proposal until June 25 at www.regulations.gov. The agency is scheduled to release its final rule by Aug. 1.

mschneider@frontlinemedcom.com

Medicare to double the penalty on 30-day readmissions