Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Policy & Regulation News

Preventable Readmissions Cost CMS $17 Billion

By Stephanie Reardon

The estimated annual cost of this problem for Medicare is $26 billion annually and $17 billion is considered avoidable.

- Preventable hospital readmissions are a big part of unnecessary medical spending. According to data from the Center for Health Information and Analysis (CHIA), the estimated annual cost of this problem for Medicare is $26 billion annually and $17 billion is considered avoidable.

These penalties are wide spread. In 2014, 80 percent of all eligible hospitals in Massachusetts were cited for readmissions. These penalties occur when patients return to a hospital within one month of having been treated. The state-wide average of these incidents is 13.8 percent.

“Reducing readmissions requires careful planning and communication among each of a patient’s providers and caregivers, as well as with community social services and patients themselves,” the CHIMA report states.

Nationally, this puts Massachusetts as the fourth highest penalized state in the U.S. for patients returning too soon after being discharged. However, the data showed that in the state this problem appeared to decline for the Medicare population from the previous years but the hospitals still incurred CMS penalties.

“The high number of Massachusetts hospitals that received penalties from Medicare in 2014 suggests that there are opportunities for providers to reduce unnecessary readmissions, improve care and, potentially, reduce costs,” the report from CHIA states.

As previously reported, Medicare fined 2,610 hospitals for admitting patients into the hospital within 30 days of a discharge last year, which is a record high. These hospitals faced a penalty rate that increased from 2 percent to 3 percent.

An article from Kiser Health Foundation, examined the readmission rates of all 50 states. Some of the worst offenders when it comes to the percentage of all hospitals penalized include New Jersey (98 percent), Connecticut (88 percent), Delaware (86 percent) and New York (80 percent).

If hospitals do not improve on this problem, then they will face even steeper penalty fees. CMS has recently posted the Fiscal Year 2015 IPPS/LTCH PPS final rule which lists and describes the process CMS will take in readjusting penalty rates for fiscal year 2015, which is based on progress.

In addition to the need for improvement in patients returning within 30 days of being released, hospitals also face other types of penalties this year. Another CMS report stated that 721 hospitals nationwide faced a one percent reduction in their Medicare payments from the federal government due to hospital acquired conditions (HAC).  These are estimated to total approximately $373 million and will impact one of every seven hospitals in the nation. Medicare payments will be lowered by 1 percent between Oct. 1, 2014 and Sept. 30, 2015.

More recently, the Star Tribune reported that 12 Minnesota hospitals faced HAC penalties for high rates of patients with incidents including catheter-related infections, bed sores, and other preventable conditions.

New Jersey hospitals were also penalized for errors and preventable infections, according to an article on The penalty will cost the 23 impacted New Jersey hospitals approximately $500,000. The San Diego Union-Tribune, reported that 8 hospitals in San Diego are being fined for errors as well.



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