Question

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

Answer 1

I think what you are referring to is the Hosiptal Readmissions Reduction Programme (HRRP) brought about by the Affordable Care Act of 2012.

First of all, lets understand the context and meaning of this programme. As per reports, nearly one-fifths of all Medicare discharges had a readmission within following 30 days. Which translates as - one in every five patients needed to revisit their hospital / healthcare centre within a month of their discharge. Such a number points out to probable lack of conscious effort on the part of the service provider to ensure that the patients are completely rid of their illness. Not only is this phenomena painful for the patients, by its sheer magnitude it is also a fiscal burden on the exchequer. Of course, not all readmissions are avoidable. But some (if not most) of them certainly are.

To enhance provider consciousness around this issue, the said programme was brought about in 2012. One of the things that this programme does is that it financially penalizes hospitals if they have higher than expected risk-standardized 30-day readmission rates for several conditions like acute myocardial infarction (heart attack), heart failure, and pneumonia. Such penalties can go up to 3 percent of their Medicare reimbursements. This is what is called a value based compensation programme, where value in the form of quality of services is the criteria for reward.

Since healthcare costs are shooting up, especially in the wake of coronavirus, value-based compensation programmes can go a long way. Before 2012, hospitals had little direct financial incentive to reduce readmissions. For Medicare beneficiaries (healthcare service providers) with inpatient services, the inpatient prospective payment system (IPPS) was the means of payments to hospitals . Notably, this payment did not include post-discharge care or interventions, associated with the reduction in readmissions. But post-2012, the scenario has changed. Providers with excessive readmissions will now be charged in the form of reduced compensations received via the IPPS. Excess readmissions are defined by measuring a hospital’s readmission rates, allowing for sex, age and co-existing conditions, which are then compared to the national averages.

Such a programme is bound to enhance quality as it is somewhat similar to a pay-for-performance model. Providers who ensure better quality are bound to receive greater compensations than those who act carelessly.