Question

Describe how the transition for premodern reimbursements programs such as (P4P or DRGs) to current value-based compensation programs can potentially further reduce hospital readmission rates. Please provide a detailed example in your response.

Answer 1

Design and developement of the Diagnosis Related Group scheme (DRGs):-

The DRGs ;are a patient classification scheme which provides a means of relating the type of patients ;a hospital treats to the cossts incurrd by the hospital. The design and developement of the DRGs began in the late sixties at Yale university. The initial motivaiton for developint the DRGs was to create an effective framework for monitoring the equality of care and the utilization of services in a hospital setting. The first large scale appliation of the DRGs was in the late seventies in the State of New jersey. The new jersey state department of Health used DRGs was in the late seventies in the State of new payment system in which hospitals were reimbursed a fixed DRG specific amount for each patient treated.

The evolution of the DRGs and their use as the basic unit of payment in Medicare's hospital reimbursement system repressents a recosgnition of the fundamental role which a hospital's case mix plays in determining its costs. In the past, hospital characteristics such as teacahing statas and bed size have been used to attempt ot explain the substantial cost differences which exist across hospitals. Howver, such characteristicss failed to account adequately for the cost impact of a hospoita's case mix. Individual hospitals havae often attempted to justify higher cost by contending that they treated were "sicker." Althouogh there has been a consensus in the hospitalindustry that a more complex case mix results in higher cost. the concept of case mix comopolexity had historically lacked a precise definition. The development of the DRGs provided the first operational means of defining and measuring a hospital's case mix complexity.

Hospital Readmissions Reduction Program

Hospital readmission measures have been touted not only as a quality measure, but also as a means to bend the healthcare cost curve.The Affordable Care Act establsihed the Hospital Readmission Reduction Program (HRRP) in 2012. Under this program,hospitals are financially penalized if they have higher than expected risk standardized 30 day readmission rates for acute myocardial infarction, heart failure, and pneumonia. The HRRP was implemented, the penalties levied, the impact it has had on transitional care and readmissions, the pros and cons of the policy, and its future.

However, decreasing hospital readmission rates through the program came at a ;price for some hospsital. CMS penalized over 2500 hospitals by more than $564 million in 2017 for excessive 30 day hospital readmission rates.And medicare isn't the only payer press.uring hospitals to prevent hospital Readmissions. Readmissions of privately insured and Medicaid beneficiareies cost $ 8.1 billion and $7.6 billion, respectively, AHRQ found.

To combat growing costs, payers across the industry are adding hospital readmission quality measures to their value based reimnursement programs. Hospsitals engaging in any model are likely to face penalties if their providers cannot improve hospital readmission rates.

Hospital can reduce readmission rates and avoid value based penalities by identifying causes of readmissions, optimizing transitional care, and improving patient engagemnete.