How Will Hospital Readmission Penalties Impact Skilled Nursing Facilities?

How Will Hospital Readmission Penalties Impact Skilled Nursing Facilities? Patrick V. Trotta, CPA Director of ElderCare Provider Services Glass Jacobson patrick.trotta@glassjacobson.com 410 356 1000

Presentation Overview Extent and causes of hospital readmissions Impact on health care delivery system Patient Protection and Affordable Care Act (PPACA, ACA, Obamacare) & Hospital Readmission Reduction Program (HRRP) Impact on Hospitals Opportunities for SNFs Effective tools to demonstrate SNF capabilities

Extent and Causes of Hospital Readmissions

Extent and Causes of Hospital Readmissions High rates of hospital readmissions are being scrutinized because of quality and cost concerns. Some hospital readmissions are planned, others are avoidable. There is a wide variation in readmission rates by geographic region and hospitals. This suggests that readmission rates can be reduced. Readmissions are being targeted in order to reduce expenditures and improve quality of care.

Extent and Causes of Hospital Readmissions High readmission rates considered marker of lower quality care Approximately 19% of acute hospital admissions readmitted within 30 days. This percentage has remained steady over several years 13% of acute hospital readmissions are potentially preventable

Extent and Causes of Hospital Readmissions Hospitals have traditionally accepted readmissions as a result of perverse financial incentives Significant proportion of total reimbursement Financial burden for reducing readmissions Financial incentive to reduce readmissions Section 3590 PPACA

Impact on Health Care Delivery System

Impact on Health Care Delivery System CMS recently began reporting readmission rates Hospital Compare Website www.hospitalcompare.hhs.gov

Impact on Health Care Delivery One in five, or nearly System 2 million Medicare beneficiaries are readmitted within 30 days of release each year, costing Medicare $17.5 billion in additional hospital bills. Condition at Hospital Discharge 30 day Rehospitalization Rate Acute Myocardial Infarction (AMI) 19.8 Heart Failure 24.8 Pneumonia 18.4 Hospital Compare. Hospital Compare National Readmissions Rate. U.S. Department of Health & Human Service. http://www.medicare.gov/download/downloaddbinterim.asp

Affordable Care Act (ACA) and Hospital Readmission Reduction Program (HRRP)

HRRP ACA created the HRRP, which will reduce Medicare payment rates for hospitals with higher than expected readmission rates for specific conditions HRRP begins October 1, 2012 Reductions to hospital payments will be determined by an adjustment factor based on a calculated assessment of excess readmissions, with a maximum payment reduction of: 1% in 2013 2% in 2014 3% i 201 d b d

HRRP For each hospital, an excess readmissions ratio is calculated based on measures of readmissions currently used in the hospital inpatient quality reporting (IQR) program. CMS has been calculating hospital readmission rates for hospital quality reporting. The HRRP ties PAYMENTS to performance on the measures.

Initial 2013 Conditions and 2015 Expansion The readmissions penalty initially applies to three conditions. In 2015, CMS will expand the program to include an additional four conditions. 2013 Conditions Acute Myocardial Infarction (AMI) Heart Failure Pneumonia These three conditions are approximately 10 percent of hospital discharges. 2015 Expansion Chronic Obstructive Pulmonary Disease (COPD) Coronary Artery Bypass Graft Percutaneous Transluminal Coronary Angioplasty Other Vascular Conditions

What Constitutes a Readmission? Any time a patient is readmitted to a hospital within a 30 day period from the initial hospitalization discharge Readmission does not have to be to the same hospital More than one hospital readmission during a 30 day period counts as only one readmission

What Constitutes a Readmission? Skilled Nursing Facilities have no penalties if patients are discharged and readmitted to the SNF within any period of time SNFs have no penalty if a patient is readmitted to a hospital

Excess Readmissions Ratio The CMS Readmissions Ratio estimates the amount by which a specific hospital increases or decreases patients risk of readmission relative to the average hospital. It is based on the specific hospital s actual admission rates relative to hospitals with similar patients. Excess Readmissions Ratio: Actual Adjusted Readmissions Expected Readmissions

Excess Readmissions Ratio The Excess Readmissions Ratio is risk adjusted. It is possible for a hospital to have a high readmissions rate (number of readmissions for the number of index admissions with that condition), but a favorable excess readmissions ratio. The Excess Readmissions Ratio is a major component in calculating the hospital s penalty.

Calculation of Excess Readmissions Penalty Quality Hospital Excess readmissions ratio: 1.05 Average DRG payment for HF: $6,000 Total HF admissions: 150 Total payments for all discharges: $6 million Sample Calculation for Heart Failure (HF) Total payments for excess readmissions: $6,000*150*(1.05 1)=$45,000 Excess readmissions payments ratio: 1 ($45,000/$6,000,000)=0.9925 Since 0.9925 is higher than the 0.99 floor for 2013, the adjustment factor would be 0.9925 The hospital s Medicare base DRG payment would be reduced by 0.25 percent in FY 2013

Application of the Reduction Only the base DRG of a payment is considered when applying the readmissions penalty. Payment modifiers (outlier payments, indirect medical education (IME), disproportionate share hospital (DSH) and low volume) are exempted. IME and DSH payments are calculated off of a base payment. Accordingly, these amounts will be lower if the hospitals base payment is reduced.

Application of the Reduction Payments received by sole community hospitals, Medicare dependent hospitals and small rural hospitals are exempt from the readmissions penalty. Excludes children s hospitals, certain cancer and research centers, and hospitals that provide primarily long-term, rehabilitative or psychiatric care Hospitals with excessive readmission rates will have their Medicare payments reduced by up to 1% in 2013 and up to 3% by 2015

Medicare Readmissions Penalties As reported by Kaiser Health News Hospital Penalty (2013) City Referral Region Bethesda Memorial Hospital 0.00% Boynton Beach Ft. Lauderdale Boca Raton Regional Hospital 0.00% Boca Raton Ft. Lauderdale Broward Health Coral Springs 0.42% Coral Springs Ft. Lauderdale Broward Health Imperial Point 0.06% Ft. Lauderdale Ft. Lauderdale Broward Health Medical Center 0.20% Ft. Lauderdale Ft. Lauderdale Broward Health North 0.29% Pompano Beach Ft. Lauderdale Columbia Hospital 0.19% West Palm Beach Ft. Lauderdale Delray Medical Center 0.00% Delray Beach Ft. Lauderdale Good Samaritan Medical Center 0.02% West Palm Beach Ft. Lauderdale Holy Cross Hospital Inc. 0.31% Ft. Lauderdale Ft. Lauderdale JFK Medical Center 0.76% Atlantis Ft. Lauderdale Jupiter Medical Center 0.00% Jupiter Ft. Lauderdale Lakeside Medical Center 0.27% Belle Glade Ft. Lauderdale Martin Memorial Medical Center 0.00% Stuart Ft. Lauderdale Northwest Medical Center 0.06% Margate Ft. Lauderdale Palm Beach Gardens Medical Center 0.88% Palm Beach Gardens Ft. Lauderdale Palms West Hospital 0.19% Loxahatchee Ft. Lauderdale Plantation General Hospital 0.03% Plantation Ft. Lauderdale St. Lucie Medical Center 0.02% Port St. Lucie Ft. Lauderdale St. Maryʹs Medical Center 0.01% West Palm Beach Ft. Lauderdale University Hospital and Medical Center 0.07% Tamarac Ft. Lauderdale Wellington Regional Medical Centher 0.73% Wellington Ft. Lauderdale West Boca Medical Centerh 0.14% Boca Raton Ft. Lauderdale Westside Regional Medical Center 0.66% Plantation Ft. Lauderdale

Medicare Readmissions Penalties As reported by Kaiser Health News For a full list of all hospitals and their readmissions penalties: http://www.kaiserhealthnews.org/~/media/files/2012/medicare%20readmissions%20penalties%202013.pdf

Impact on Hospitals

Impact on Hospitals Reduced Medicare payments Increased focus on transitions between care settings and care provided after hospital discharge Hospitals will become increasingly focused on patient care after discharge to ensure that patients do not require readmission. Emphasis on coordination of care. Hospitals will be increasingly interested in partnering with Post-acute Care Providers to improve care. Need for infrastructure to manage and reduce readmissions Hospitals will need to manage readmissions and avoid payment penalties

Opportunities for SNFs

Opportunities for SNFs Hospital systems becoming insurers 20% of hospital networks market an insurance product Hospital systems entering full risk contracts with Medicare and Medicaid Bundled payments

Opportunities for SNFs Hospital discharges to post-acute care settings Approximately 40% of hospital discharges for heart attacks, heart failure and pneumonia patients go to post-acute care settings (SNF, HHA, IRF, LTACH) Of this 40%, at least half go to SNFs

Opportunities for SNFs Increased admissions and occupancy Increased revenue Public and industry perception of being a quality provider Collaboration with hospital referral sources to coordinate care

Effective Tools to Demonstrate SNF Capabilities

Effective Tools to Demonstrate SNF Capabilities Data, data, data Track ALL admissions from short term acute care hospitals (STACHs) Initially, focus on AMI, heart failure, pneumonia Secondarily, Chronic Obstructive Pulmonary Disease (COPD), Coronary Artery Bypass Graft, Percutaneous Coronary Interventions, other vascular procedures and conditions

Effective Tools to Demonstrate SNF Capabilities Measurement Readmission rates and causes By discharge diagnosis (e.g. Heart Failure, etc.) Social history Program design Targets reduction of hospital readmissions Document program results

Effective Tools to Demonstrate SNF Capabilities Communication Staff Referral sources Rates Program results Coordination Referral sources Other post-acute providers Family and caregivers

Questions? Patrick V. Trotta, CPA Director of ElderCare Provider Services Glass Jacobson Owings Mills, MD For a copy of this presentation (w/hyperlinks) email: christine.guenther@glassjacobson.com patrick.trotta@glassjacobs on.com 410. 356. 1000 www.glassjacobson.com/eldercare