Hospitals Dodge Financial Penalty with Medicare ACA Loophole
By - According to the Affordable Care Act (ACA), hospitals demonstrating low quality measures face financial penalties under Medicare. However, due to a discovered loophole as confirmed within a new Health Affairs study, hospitals are now increasingly renaming Medicare patient readmissions as “observation stays” or are providing care for returning Medicare patients in the Emergency Room (ER) to thwart Medicare's financial penalties.
This idea is confirmed within Health Affairs by researchers David U. Himmelstein, MD, FACP, Professor at the City University of New York School of Public Health at Hunter College and Lecturer of Medicine at Harvard Medical School and Steffie Woolhandler, MD, MPH, FACP, Professor in the CUNY School of Public Health at Hunter College, Adjunct Clinical Professor at Albert Einstein College of Medicine, and Lecturer in Medicine at Harvard Medical School.
Although the Centers for Medicare & Medicaid Services (CMS) maintains a recent decline in hospital readmissions among Medicare patients is “a major advance for patient safety,” Himmelstein and Woolhandler say reality paints quite a different picture. “[Lost] amidst the celebration is the fact that hospitals are increasingly ‘observing’ patients (or treating returning patients in the emergency department) rather than ‘readmitting’ them,” Himmelstein and Woolhandler state. “But while re-labeling helps hospitals meet CMS’ quality standards (and avoid costly fines), it probably signals little real quality gain and often leaves patients worse off financially,” they add.
Nearly 10 percent of hospital stays occurring within 30 days of discharge are classified under “observation,” maintain researchers. One in four hospitals classified at least 14 percent of all repeat stays as falling under the “observation” category. “[Analysis] of time trends in observation stays makes it clear that they account for a significant chunk of the reduction in readmissions,” researchers say. “Between 2010 and 2013, 36 percent of the claimed decrease in readmissions was actually just a shift to observation stays,” they add.
More discharged patients are being treated in the ED without admission, the researchers claim. “Medicare rewards both approaches equally, but for hospitals, re-labeling is probably far cheaper (and more profitable) than re-designing. Medicare’s readmission penalties are among the growing number of pay-for-performance (P4P) and value-based purchasing initiatives that offer bonuses to high performers and/or penalize the laggards,” the authors add.
Himmelstein and Woolhandler conclude their research about Medicare readmission penalties with the following sentiment: “Become good at cheating and you never need to become good at anything else.”
Researchers highlight an additional "shocking" ACA flaw
As RevCycleIntelligence.com reported last June, Himmelstein and Woolhandler previously confirmed a series of other dramatic flaws connected to the ACA with "shocking" research – most notably that the ACA promotes billions of dollars in bureaucratic waste with the bureaucracy gobbling up over a quarter of federal spending.
“We are wasting an enormous amount of money that ought to go to healthcare on paperwork,” said Himmelstein in a personal interview with RevCycleIntelligence.com. “There is no reason, other than political difficulty, that we can’t shed massive bureaucratic costs,” he added. Himmelstein and Woolhandler confirmed CMS’s projection of $2.7 trillion in spending for private insurance overhead and administering government health problems – chiefly Medicare and Medicaid – between 2014 and 2022, including a quite sizable $273 billion in new administrative costs tied to the ACA.
