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Avoiding Medicare Penalties: Why Better Transitions of Care Are Key

Hospital leaders have a clinical — and fiduciary — duty to better manage care transitions to avoid readmissions. Excessive readmissions aren't just risks to patient safety and the organization's reputation. Under current structures for Medicare penalties, excessive 30-day readmission rates can significantly threaten a hospital's bottom line. 

From October 2022 through September, Medicare 30-day readmission penalties will cost hospitals about $320 million. That's significant money, especially considering hospitals faced what Kaufman Hall described as the "worst financial year since the start of the pandemic" in 2022. 

This article will share what you need to know about how Medicare penalties are determined, the role of transitions of care in reducing readmissions, and strategies your organization should consider to better manage clinical and financial risks in this area and hopefully reduce the likelihood that you will face future penalties. 

How Is CMS Targeting Readmissions? 

Under the CMS Hospital Readmissions Reduction Program (HRRP), hospital payment for certain conditions is linked to the ability to control 30-day readmissions. 

CMS uses an ERR, or excess readmission ratio, to assess hospital readmission performance. This number is a ratio of predicted-to-expected 30-day readmission rates. The higher a hospital's ERR, the less reimbursement it will receive. Under HRRP, those hospitals with higher-than-expected readmission rates are assessed penalties of up to 3% of their Medicare fee-for-service base operating diagnosis-related group payments. 

What Does Readmission Mean Under CMS Guidelines? 

Any strategy discussion around decreasing avoidable readmissions should first begin by recognizing how CMS defines readmission. Under HRRP, a readmission is considered a necessary hospital admission that is unplanned and occurs within 30 days of discharge from the initial admission. It includes patients admitted to the same hospital or a different acute care hospital (included in CMS's Hospital Readmission Reduction Program) for any reason.  

Readmissions to any applicable acute care hospital are counted, no matter the principal diagnosis. The measures exclude some planned readmissions. 

For an example of a readmission that would count toward a hospital's CMS 30-day readmission rate, consider a situation where a patient who was admitted for a knee replacement is discharged within a reasonable time frame, seemingly without incident. However, during their post-acute period, they have a misunderstanding about their medications and fail to take their entire course of antibiotics. They then return to the emergency room in two weeks and are admitted with sepsis. This scenario would count toward a hospital's CMS 30-day readmission rate.  

Medicare Penalties for 30-day Readmissions 

Through CMS's Hospital Readmissions Reduction Program, payment is essentially based on performance results. The six areas targeted for readmissions under the program are: 

  • Acute myocardial infarction (AMI) 
  • Chronic obstructive pulmonary disease (COPD) 
  • Heart failure (HF) 
  • Pneumonia 
  • Coronary artery bypass graft (CABG) surgery 
  • Elective primary total hip arthroplasty and/or total knee arthroplasty (THA/TKA) 

How Are Medicare Penalties Calculated? 

CMS calculates a payment adjustment factor corresponding to the percentage of a hospital's payment that will be reduced. This payment adjustment factor is a weighted average of a hospital's performance across the six areas. CMS applies the payment adjustment factor for all discharges in the applicable fiscal year.  

Note: Hospitals can respond before the Medicare penalties are incurred. CMS states in its HRRP guidance that a 30-day review and correction period allows hospitals to review and correct their HRRP payment reduction and component result calculations as reflected in their hospital-specific report (HSR) prior to them being used to adjust payments.  

Role of Transitions of Care  

So, what can you do to reduce your CMS 30-day readmission rate? Research shows that focusing on transitions of care can make a significant impact. 

Transitions of care encompass the time frame from when a patient is discharged from the hospital and transitions to a different facility, such as a rehab facility, skilled nursing facility, or even home. This period is most vulnerable to triggering potentially avoidable readmissions because it's when the patient is most likely to experience gaps in care, missed communications, or poor comprehension of proper steps in the face of worsening symptoms or unaddressed test results. Patients may also see adverse effects from introducing new medications following transitions of care. Confusion or lack of accountability may occur over medication administration and therapies. Additionally, the patient and caregivers — who may be new to the role — may misunderstand follow-up care and testing needs.  

Research shows poorly executed care transitions can lead to adverse events, unnecessary readmissions, reduced quality of life, and unneeded use of resources. Subpar transitions also contribute to poor health outcomes, such as harm caused by medication errors, procedure complications, infections, and falls. 

Reasons for breakdowns in care transitions can be vast and sometimes multifactorial. Often, they stem from three areas:  

  • Communication breakdowns. Care providers don’t always effectively and completely communicate important information among themselves and with the patient and the patient’s caregivers at home in a timely fashion. 
  • Patient education breakdowns. Patients and/or caregivers sometimes receive conflicting recommendations, confusing medication regimens, and unclear instructions about follow-up care. 
  • Accountability breakdowns. In many cases, no physician or clinical entity ensures the patient's care is properly coordinated across various settings and providers. 

When you coordinate the transition process and provide a comprehensive communication model between multiple providers and the patient and caregivers, you help mitigate risks considerably. As care transitions improve, the risk of readmissions and associated penalties should be reduced. 

Care Transition Improvement Strategies  

Successful readmission reduction programs use multiple interventions simultaneously, including improved communication among care providers, better patient and caregiver education, and coordination of social and health care services. 

Ideas to build on at your organization: 

1. Treat your discharge checklist like a living document with an eye on trends in avoidable readmissions.  

At a minimum of once a year, a multidisciplinary team should review your discharge planning checklist and consider updates based on reasons for potentially preventable readmissions that have occurred. What does readmission mean when considering care gaps that patients may have experienced in the past year? For example, are you asking the right types of inquiries regarding their living situation before discharging a patient? Are you adequately addressing the need for prosthetic items? Are you inquiring about transportation needs for follow-up appointments soon enough for plans to be implemented?  

2. Focus on strengthening links with aftercare.  

Does the patient have a primary care provider or usual source of care? If no linkage exists, hospital research shows that staff should attempt to provide a referral and ensure the patient gets connected to a primary care provider to support post-discharge follow-up appointments. Ideally, processes should be in place to schedule post-discharge follow-up appointments with the primary care physician and for diagnostic testing before discharge. 

3. Make use of systems around medication coordination.  

In the inpatient setting, education about medications often occurs at the time of patient discharge. Unfortunately, despite educational interventions, evidence points to high rates of medication errors, adverse drug events, and patient nonadherence following patient discharge from the hospital. 

Before discharge, medications should be reviewed to ensure all medication changes — new drugs, dose changes on previously prescribed drugs, and elimination of drugs — are accurate in the medical record. Following discharge, patients should have their medications reconciled (i.e., medication reconciliation post-discharge, or MRP). 

Your Transitions of Care Solution? Cureatr.  

By partnering with Cureatr, hospitals can use Cureatr technology during discharge to integrate the patient's medical record with health information exchanges and national aggregators to monitor real-time prescription and healthcare utilization information. In addition, a Cureatr clinical pharmacist will perform MRP and intervene with patients or their caregivers to verify appropriate medication adherence following discharge. If a clinical pharmacist identifies a suboptimal medication issue, such as failure to pick up or fill a prescription or a prescription conflict, the clinical pharmacist will work to address and resolve the issue. This combination of technology and expert clinical pharmacist intervention has been proven to achieve a more than 20% reduction in the 30-day all-cause readmission rates. 

Reduce Your Risk of Avoidable Readmissions with the Right Medication Management Approach 

Cureatr offers medication reconciliation, medication adherence, and deprescribing assistance. Learn more about how the right medication management approach can help your organization reduce avoidable readmissions and protect your bottom line. 

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