Safety-Net Hospitals Hit Hard by Readmission Penalties

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Safety-net hospitals are 24% more likely to pay penalties for excess readmissions, and these penalties are, on average, 18% higher.

Readmissions at DSH vs. Non-DSH Facilities

Without some sort of dramatic change these hospitals will continue mass layoffs and reductions in services to some of the country’s sickest patients.

Safety-net hospitals are 24% more likely to pay penalties for excess readmissions, and these penalties are, on average, 18% higher. These findings are based on initial analysis of data released by Kaiser Health on 8/13.

Starting October 1st under the Affordable Care Act, hospitals nationwide will be getting penalized for having exceptionally high readmission rates. On 8/13, CMS and Kaiser Health released the initial estimates for these penalties for 3,367 hospitals across the US. Of those providers, 8% or 278 hospitals will receive the maximum penalty under the new system.

A CipherHealth analysis of the CMS data revealed that both nationally and in many states penalties for hospitals serving the most high-need patients will dwarf the penalties being given to other hospitals. Hospitals with high-need populations and high levels of indigent care currently benefit from increased supplemental payments from the federal government under the Disproportionate Share Hospital (DSH) program.

CipherHealth found that hospitals with high DSH payments (DSH Adjustment > .5) had average penalties that were over twice as high as hospitals with lower-need patients in certain states. Penalties for high-need hospitals in Florida, for example, were 134% higher than penalties in other hospitals statewide. Pennsylvania’s safety-net hospitals received 107% higher penalties than other providers and, in New York, penalties for safety-net hospitals were 44% higher. Texas appeared to buck the trend, where the gap between penalties for safety-net and other hospitals was 18%, in line with national average.

“The DSH hospitals are truly caught between a rock and a hard place. On the one hand, the government is currently implementing steep reductions in DSH payments. On the other, performance incentives from Value Based Purchasing and Readmissions are carving away at reimbursements,” said Zachary Silverzweig, a readmissions expert from CipherHealth. “There won’t be any place to turn. Without some sort of dramatic change these hospitals will continue mass layoffs and reductions in services to some of the country’s sickest patients.”

CipherHealth has been helping hospitals nationwide reduce their readmission rates by improving care coordination and identifying patient issues after they are discharged. Several CipherHealth clients are high-DSH hospitals that are concerned about the impending penalties and payment reductions, including one of the nation’s top-five disproportionate share hospitals, as measured by DSH payment adjustment.

“Working with high-DSH facilities is a unique experience. They need new technology like their patients need primary care,” said Alex Hejnosz, a co-founder of CipherHealth responsible for DSH program development. “There are a lot of solutions that are known to be effective, but it’s hard to keep doing more with less. Dwindling reimbursements and tightened DSH support will force the executives at these organizations to face some truly difficult decisions in the years to come.”

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Alex Hejnosz
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