Large, safety-net hospitals may take brunt of penalties

Large teaching hospitals and safety-net hospitals are more likely to be penalized under Medicare’s readmissions reduction program, according to an analysis that was published as a research letter Jan. 23 in the Journal of the American Medical Association.

The publicly available Hospital Readmissions Reduction Program Supplemental Data File contains data on the number of hospital cases and excess readmission ratios for heart failure, MI and pneumonia, which Medicare uses to calculate penalties for what it determines are higher-than-expected preventable readmissions for each of the three conditions. The penalties could equal up to 1 percent of total Medicare reimbursement in fiscal year 2013, with increases up to 2 percent in 2014 and 3 percent in 2015.

Karen E. Joynt, MD, MPH, and Ashish K. Jha, MD, MPH, both of Brigham and Women’s Hospital in Boston, used the data file to categorize hospitals as among either the top half of penalized hospitals, the bottom half of penalized hospitals or hospitals with no penalties. They then linked that information with the American Hospital Association’s annual survey to identify which hospitals were more likely to care for sicker patients and which were more likely to be safety-net hospitals.

Joynt and Jha chose those two types of hospitals because research has shown that medical complexity and socioeconomic status may contribute to readmissions. They defined hospitals that treated medically complex patients as large hospitals with more than 400 beds and major hospitals that belonged to the Council for Teaching Hospitals. Safety-net hospitals were those in the highest quartile of a Center for Medicare & Medicaid Services index on providers that care for the poor.

They then compared types of hospitals and calculated the odds of receiving high penalties, low penalties or no penalties by type of hospital. Overall, 66.7 percent of hospitals will be targeted for payment cuts. Large hospitals are more likely than small hospitals to be highly penalized, at 40 percent vs. 28 percent, and less likely to be spared, at 24 percent vs. 47 percent.

A similar pattern was shown in a comparison of teaching and nonteaching hospitals, with the former more likely to be highly penalized (44 percent vs. 33 percent) and less likely to not be penalized (19 percent vs. 35 percent). Safety-net hospitals also faced higher odds of being highly penalized, at 44 percent compared with 30 percent for those that are not a safety net, and lower odds of receiving no penalties, at 20 percent vs. 37 percent.

Based on a multivariate analysis, the researchers determined safety net hospitals had the greatest odds of being highly penalized under the program.

“The consequences of these payment cuts remain to be seen,” Joynt and Jha wrote. “While the current penalties of up to 1 percent of total Medicare reimbursement in fiscal year 2013 may be modest for some hospitals, they may represent substantial financial shortfalls for hospitals operating on low profit margins.”

They pointed out that there is no established method for identifying hospitals based on medical complexity and as safety-net hospitals but that their definitions are widely used.