When the CMS released its fiscal year 2014 proposed rule for the Hospital Readmission Reduction Program, many were surprised to see the financial impact of this program reduced from $280 million in FY 2013 to an estimated $175 million in FY 2014. Through its large financial incentives, the Hospital Readmission Reduction Program has driven hospitals across the nation to make significant investments in resources and programs to reduce readmissions. With the overall financial penalty of the program being reduced in FY 2014, some hospitals are now wondering if their investments in care continuity and disease management will continue to be worth it.
Under the Patient Protection and Affordable Care Act, there are two major programs that drive hospitals toward "outcome-based" (as opposed to "volume-based") care. One is the Hospital Readmission Reduction Program and the other is the Value-Based Purchasing program. In FY 2014, both programs are undergoing significant changes.
Readmissions penalties may indeed decrease, but at the same time the Value-Based Purchasing program is undergoing a dramatic shift to include 30-day mortality outcomes for congestive heart failure, acute myocardial infarction and pneumonia. These measures now make up 30 percent of the payment calculation for the VBP program. If anything, this shows that hospitals need to place even more emphasis on coordinated care for these diagnoses.
Furthermore, the HRRP is being expanded to include chronic obstructive pulmonary disease and hip/knee replacement readmissions in FY 2015 and the maximum penalty per hospital is increasing from 1 percent to 2 percent of total annual Medicare payments. This means that hospitals once out-of-the-woods on readmissions may now be subject to severe penalties. At the same time, the VBP changes expand the bottom-line impact of patient outcomes for those with CHF, AMI or pneumonia.
On the surface, the recent announcement from CMS seems to call into question the investments hospitals are making in care continuity and readmission reduction programs, but don't be fooled: taken holistically, this year's changes to CMS programs actually increase the importance (both financially and morally) of programs focused on improving patient health.
Improving continuity of care should continue to be a top priority for hospitals in the years to come.
Zachary Silverzweig is one of the founders of CipherHealth and an eight-year veteran entrepreneur. At CipherHealth, Mr. Silverzweig leads efforts to develop new products and innovative solutions for hospitals, focusing on tools that improve outcomes through better patient engagement.
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