Study: The drop in readmissions isn't because of more observation stays. It's real.

Observation stays have increased by 2 percentage points since 2007

Although hospital readmissions have fallen in recent years, some experts have raised concerns that the reduction resulted largely from hospitals placing more patients under observation status to avoid readmission penalties under the Hospital Readmission Reduction Program (HRRP).

But a study published Wednesday in the New England Journal of Medicine (NEJM) "shows that this isn't the case" and that HRRP is "working," says Rachael Zuckerman, an economist at HHS and lead author of the study.

Under the Affordable Care Act, hospitals are incented through HRRP to reduce readmissions for certain conditions within 30 days of discharge. If readmission rates are too high, hospitals can see their Medicare payments reduced by reduced by as much as 3 percent. More than 2,600 hospitals will lose a combined $420 million in Medicare payments next year under the program.

For the study, Zuckerman and other HHS researchers analyzed data from nearly 3,400 hospitals on readmissions and observation unit stays between October 2007 and May 2015—before and after HRRP was implemented. They found that the readmission rate for HRRP-targeted conditions dropped from 21.5 percent in 2007 to 17.8 percent in 2015. Total returns to the hospital, including both readmissions and observation unit stays, also decreased.

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Meanwhile, Medicare claims for observation unit stays increased from 2.6 percent in 2007 to 4.6 percent in 2015 for HRRP targeted conditions.

But researchers say there was no correlation between the increase in observation unit stays and the decrease in readmission rates. Rather, they found that the growth in observation stays was likely driven by unrelated factors, "such as confusion over whether an inpatient stay would be deemed inappropriate by Medicare recovery audit contractors."


Harlan Krumholz, director of the Center for Outcomes Research and Evaluation at Yale-New Haven Hospital, tells Modern Healthcare that the findings are encouraging.

"[The drop in readmissions] validates the idea that we can stimulate attention to a largely ignored issue, galvanize action, and create change," says Krumholz.

Some researchers who previously believed that observation stays were responsible for the drop in readmissions say the study changed their mind.

Jha adds that the study "leaves a host of issues unanswered (as any good study will)," such as whether return visits to the ED could be contributing to the reported drop in readmissions.

Meanwhile, Steffie Woolhandler, a professor at the City University of New York's School of Public Health, is not convinced by the findings. "Some hospitals are no doubt doing the hard work of helping patients stay out of the hospital," she tells Modern Healthcare. "But many are likely gaming the readmissions penalties" (Rice, Modern Healthcare, 2/24; Zuckerman, HHS blog, 2/24; Zuckerman et al., England Journal of Medicine, 2/24).

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