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How much will readmission penalties cost? Hospitals do the math

Penalized facilities already are working to avoid future penalties

Topics: Medicare, Reimbursement, Finance, Health Policy, Market Trends, Strategy, Payer and Regulatory Policy, Readmissions, Quality, Performance Improvement

August 24, 2012

More than 2,200 hospitals nationwide are crunching the numbers to figure out how many Medicare dollars they will lose when readmissions penalties go into effect in October, Kaiser Health News reports.

The cuts will come from the Hospital Readmissions Reduction Program, which was mandated by the Affordable Care Act and reduces Medicare payments for excess readmissions beginning on Oct. 1. Medicare expects to recuperate $280 million in the program's first year.

KHN earlier this month determined the number of hospitals that will face penalties by analyzing the "Readmissions Adjustment Factor" included in the latest CMS hospital data. Altogether, it found that 2,211 hospitals will lose as much as 1% of overall payments because of excess readmissions in FY 2013.

According to KHN, individual hospitals are now estimating out exactly how much they will lose under the changes. At Ohio State University's Wexner Medical Center, for example, officials expect to lose $700,000 next year because of their 0.64% penalty.

However, hospitals cannot yet determine the exact cost of the penalties because the penalty percentage will be applied to each Medicare bill and thus vary based on the amount of Medicare service provided next year.

Many of the facilities that face penalties in FY 2013 are launching efforts to reduce readmissions and avoid future penalties, KHN reports. At UPMC's McKeesport hospital, where the readmissions penalty is 0.68%, officials already have begun placing nurse practitioners in nursing homes in an effort to reduce readmissions.

"I think overall it's going to allow us to give a higher quality of care more efficiently and more effectively, and I think actually we're all excited to do that," Wexner CFO Michael Rutherford told the Columbus Dispatch (Rau, KHN, 8/24).

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