Reduce Readmissions

Why Reduce Readmissions?

Why should readmissions be at the top of your mind? To answer this, we first need a bit of context of what has been happening in healthcare in recent times.

Healthcare in the USA is very dynamic. The legal and technological landscape is continually evolving, but what is becoming very apparent is the desire for healthcare organizations to achieve the quadruple aim of healthcare. The 4 aims are Improved Patient Experience, Better Outcomes, Lower Costs and Improved Clinician Experience. Seeing how the healthcare business model is becoming more value-based, hospitals and clinics alike are devoting their resources to add value wherever they can. It is usually done by uplifting the care experience, from both the patient’s and clinician’s perspective, lowering costs wherever possible, but improving patient outcomes at the same time. It is no easy feat to achieve all 4, but because of all the innovation that has been happening, the likelihood of achieving it is more plausible.

Readmission, or the return of a patient to the hospital within a certain period of time after discharge, can have negative consequences. It has been linked to higher mortality rates and increased patient stress. On the other hand, lower readmission rates are associated with improved outcomes and higher patient satisfaction. Remote patient management can help reduce readmissions by providing continuous monitoring and support, making the transition from hospital to home easier and smoother.

Do You Know Your Current 30-day Readmission Rates?

This is where it all starts. Do you have an idea what this number may be? Whatever it is, if it exceeds the allowed readmission rate as set by the Hospital Readmissions Reduction Program (HRRP), you could be fined as much as 3% of all Medicare payments for that DRG (Diagnosis Related Group). Your organization will have its records for its 30-day readmission numbers for all the different conditions listed by CMS for its HRRP program, which began in 2015. This information is also available on healthcare databases such as Definitive Healthcare, and publicly too, on Medicare’s website.

Are you Penalized for Readmissions at the Moment?

Before digging up your numbers, it could be that you are being penalized for excessive readmissions right now. This tool by KHN shows what percentage of Medicare payments was withheld for each hospital for excessive readmissions, in the past 5 years. Of course, you should have this information internally as well. Keep in mind, this penalty was accounted for using all cases of readmissions from multiple diseases. But chronic diseases like COPD and CHF are the main culprits for most hospitals. It is most likely that you have excess readmission ratio for these diseases. Take a look at your readmission rates from this Medicare dataset or your internal records. You will know which conditions are responsible for causing excess readmissions.

If you focus on reducing the readmissions of those chronic care conditions for which the predicted readmissions are higher than the expected readmissions, you can save a tremendous amount by avoiding penalties. Saving a total of 3% of what should rightly be yours to keep amounts to a lot of money in terms of total medicare payments. And every year counts! Because when judging performance for readmissions, CMS looks at 3 years at a time. So when deciding on 2020 penalties, it will look at performance from 2017-2019. So every year is precious, which is why it is better to start putting together your readmission reduction strategy sooner than later.

Thinking About Revenue?


When you put in the effort to reduce readmissions, it is not just about reducing costs through avoiding penalties, but about increasing your revenues as well. Sure, you might miss payments from patients who would otherwise be admitted within a 30-day span, but CMS recognizes that care quality is being improved and has programs in place to reward the hospital

The Quality Payment Program (QPM)

The Quality Payment Program (QPM) replaced the Sustainable Growth Formula (SGR) in 2015, which determined Medicare payment increases. After the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), CMS discontinued SGR, and started The Quality Payment Program(QPM). So now, high-value, high-quality Medicare clinicians are rewarded with payment increases, but their payments are reduced when not meeting performance standards. So there is absolutely no way out by providing substandard quality. The good news is when reducing readmissions, not only do you avoid costs in penalties, but through the Quality Payment Program, you can increase your revenue as well. There are two ways to do this. Under QPM, there is a Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (AAPMs).

Merit-Based Incentive Payment System (MIPS)

Under MIPS, there are 4 categories that make up the eligible physician’s final score, which determines the payment adjustment. These 4 categories are Quality, Promoting Interoperability, Improvement Activities and Cost. So, by reducing readmissions, you could score well in both the quality and cost categories. One of the program’s mandatory quality measures is 30-day hospital readmission rates for physician groups of 16 more who collectively have more than 200 admissions annually. So by working on readmissions, you are also working on quality. As far as Cost goes, it is more straightforward. Reducing readmissions leads to less administrative burden and reduces the amount spent per medicare beneficiary. Thus, it helps you score well in Cost as well. In 2019, Quality carried 45% weight on your final MIPS score, and cost carried 15% weight.  

There are plenty of measures in Improvement Activities and Promoting Interoperability as well that you will be able to score on. These will not be directly related to readmissions, but the RPM solution you will use to address readmissions will have spillover benefits, such as the Path Navigator Program which is listed as an Improvement Activity for 2020. In fact, a solution like RPM is perfectly suited for such initiatives which are geared toward improving care coordination. Regarding Promoting Interoperability, a solution like RPM gels well with making healthcare data more easily accessible. As long as you have a certified EHR in place, vital signs and care information from your patients can be integrated into your system. The idea of remote patient monitoring in itself is an interoperable concept, as there must be an electronic exchange of information from one platform to another.

So what does it all mean? The payment adjustment for a year is based on performance two years earlier. Currently, depending on performance in 2020, the payment adjustment for 2022 could be a 9% swing either way. So combined with readmissions and MIPS, you are looking at a 12% payment swing either way in 2022.

Your physicians must participate in MIPS if they do these 3 things: 

  • Bill more than $90,000 for Part B covered professional services
  • See more than 200 Part B patients
  • Provide 200 or more covered professional services to Part B patients.

Advanced Alternative Payment Models (AAPMs)

Now let’s turn our focus to Advanced Alternative Payment Models (AAPMs). Such models let hospitals earn more rewards in exchange for taking on risk related to patient outcomes. The CMS will provide a list of care models each year that qualify for Advanced APM incentive payments. Please visit CMS’s AAPMs page to see the Advanced APM care models for 2020.

The advantage of AAPMs is that you can be excluded from MIPS and you get a 5% lump sum bonus for participation. The bonus is based on the previous year’s Medicare Part B payments. The bonus applies in payment years 2019-2024. Qualifying participants will receive a 0.75% increase to their Medicare physician fee schedule (PFS) beginning in 2026. 

Reduce Costs & Increase Revenue

Regardless of whether you choose MIPS or AAPMs, reducing readmissions is an extremely useful quality measure that will enable you to earn positive payment adjustments on your annual revenue. So then, by reducing readmissions not only are you curbing costs through penalties, but also gaining more revenue. It’s a way to stretch your profit margins. But despite such gains, you may ask yourself, is the problem big enough to be solved? Or in other words, is it just an opportunity, or is it more of a problem that merits fixing?

Readmissions have always been a major problem, and it is here to stay if it is not being solved, which is where the opportunity part of the equation comes in. Approximately, 20% of Medicare beneficiaries are readmitted within 30 days of discharge. For private insurers, this number fluctuates anywhere from 15% to 25%. Thus, there is definitely room for improvement. A study presented by the Harvard Business Review found that on average, a hospital could reduce its readmission rates by 5% if it simply prioritized communication with patients while also complying with evidence-based standards of care. Remote care not only facilitates communication by providing both synchronous and asynchronous video conferencing and text messaging, but by also relaying patient information in real-time. Some of the more advanced remote care solutions also have pathways of care which are used to meet the aforementioned evidenced-based standards of care.

A Case by Case Basis

There are enough readmission cases out there to make a difference in your bottom-line figures if you take the necessary steps to address the issue. But in case you are wondering if it makes a difference on a case-by-case basis, it does! Firstly, we must acknowledge that there will always be some level of readmissions. It cannot be totally eliminated. But CMS does not penalize readmissions, it penalizes excess readmissions. This bit of difference means everything! It means that you are allowed to have an allowable number of readmissions which add to your net profit. Indeed, such cases are unforeseeable, and a hospital should not be penalized for them. But for every excess case, the avg. penalty amounts to $21,371 taking into all conditions in CMS’s readmissions reduction program. The average profit per excess case comes to $4,046 and your average net loss per excess case is $17,325.

Patient and Clinician Experience

So far, we have only discussed costs and revenue. By reducing readmissions, you reduce costs while providing a higher level of care that improves patient outcomes by keeping the patient home. Thus Better Outcomes and Lower Costs, two of the four quadruple aims of healthcare, are accounted for. What about improving patient and clinician experience? Patient experience can translate into greater customer loyalty via word of mouth. You should keep in mind, that when you reduce readmissions via remote care, you are continuing to provide care, just in an outpatient setting. Your quality of care shoots up in the eyes of the patient. According to a report, hospital hospitals with superior patient experience had 50% higher net margins, compared to those with average patient experience.

Regarding clinician experience, using automation features in remote care reduces stress; this in turn leads to lesser burnout.

Beyond Medicare

So far, we have kept it to Medicare’s rules, which is understandable since Medicare patients alone account for 56% of all readmissions, and make up on average 40% of the payor mix. But you should know that reducing readmissions will please the rest of the payers in the payor mix. There is still plenty of opportunity to reduce readmissions of the non-Medicare population. This is important to do, because such payors account for the other 60% of the payor mix. Those payers, like Medicare, are also increasingly moving towards Value-Based payment models. This is good news because as we saw with Medicare’s Quality Payment Program, reducing readmissions is always a great value addition because it improves quality while reducing costs.  In fact, almost half of all healthcare transactions are now value-based.

Private Insurance

Private insurers see reducing readmissions as a good thing. Like Medicare, they also do not like expenditures skyrocketing. They have no problems reimbursing you, but only if you provide actual value. Let’s look at UnitedHealth, USA’s biggest health insurance company by far. Like Medicare’s Quality Payment Program, they too have performance-based contracts, where reducing readmissions help you get a better return for your services. But you should know that if you look beyond performance-based programs, reducing readmissions’ importance rises even more!

They have bundled and episode-based programs, where you are paid a sum in advance to manage the overall course of treatment. You would not want high readmissions in such scenarios, as it would mean a loss for you.

One step beyond this, there are accountable care programs where you can share savings, and also share risks with UnitedHealth. This mirrors Medicare’s AAMPs programs. Again, you have to be accountable for the improvement of patients, or else not make any money from shared savings from the amount designated to you. Thus reducing readmissions is extremely important in this scenario as well, as you would want the maximum % of shared savings, which is 50%. If you opt for a shared risk, it’s even more important, as you will be penalized if you over the amount that was allotted to you. But if you don’t, you could make as much as 75% of shared savings. Those percentages are from Medicare’s AAMPs, but UnitedHealth will have something similar as well.

Is it Possible to Stick to Fee for Service?

 No. Medicare’s QPM is mandatory, as we already discovered. And more and more private insurers are moving towards value-based payment models, that vary in degree of how advanced they are. But they all tie payments to quality! We just covered all of UnitedHealth’s programs. Now, I don’t know what your exact payment situation is, but 44% of all private insurance payments are now tied to quality, and not volume. And this number will only increase in the future. Even if you continue using Fee for Service, those Fee for Service programs will have some aspect to it, such as the Chronic Care Management program, where you are paid a monthly sum for providing monthly value. For excess readmissions, you will lose money regardless if it’s Fee for Service or Value-Based.

What are the proven options to tackle readmissions?

Once you are convinced of the importance of reducing readmissions, it is time to take action. Healthcare academia has many papers that show how RPM reduced hospital readmissions, but all cases are contextual. If you will actually reduce readmission depends on two things. One, how good is the RPM solution, and two, how good is your implementation?

As we mentioned in the beginning, healthcare is very dynamic. This means you need to evolve with technology, every piece of information presented in this post is relevant up to at least 2022. But that does not mean more changes will not happen in the interim which makes it more favourable to reduce readmissions or uncover new ways of doing so. Subscribe to our Aetonix Readmission Reduction Series by clicking the button above, where we keep you up to date with all the latest developments that keep you ahead of the pack in tackling readmissions.


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