Editorial

Revisiting Readmissions — Changing the Incentives for Shared Accountability

Arnold M. Epstein, M.D., M.A.

N Engl J Med 2009; 360:1457-1459April 2, 2009

Article

When legislation was enacted in 1983 establishing prospective payment for hospitals, the incentives for hospitals changed dramatically. Cost-based payments for hospital days and services were replaced with a set payment per admission that was based on the patient's diagnosis-related group. The goal of the legislation was to encourage shorter lengths of stay and more efficient care, but policymakers were also concerned about possible increases in readmissions. Higher rates of readmissions, they thought, might be a consequence of the legislation either because patients might be prematurely discharged from the index hospitalization or because services might be “unbundled” by hospitals in an attempt to receive two separate payments for what could have been a single clinical episode. Although little evidence emerged to substantiate either concern, today — two and a half decades later — policymakers are focused on readmissions again, albeit for very different reasons.

In this issue of the Journal, Jencks and colleagues1 provide a current profile of readmissions among the Medicare population. Readmissions are common, with 20% of hospitalized patients readmitted within 30 days and 56% within a year, and vary considerably, with rates ranging from 13% in Idaho to more than 23% in Washington, DC. These high rates may result, in part, from inadequate coordination of care and poor discharge planning, since half of the patients who were readmitted within 30 days had no ambulatory visit before the rehospitalization. Although some patients may have been in close contact with doctors by telephone, these figures still raise questions about transitions between hospital and ambulatory care and complement a substantial body of other evidence that shows suboptimal coordination of care at the time of discharge.2

The evidence of variability in readmission rates, of a failure to provide close patient follow-up, and of inadequate communication between doctors and patients and among doctors at the time of discharge has raised concerns that many readmissions may be preventable and has pointed to policy changes that might both improve health outcomes and substantially lower costs. This evidence also reveals a lack of shared incentives for hospitals and physicians to use hospital care efficiently. To address these concerns, the Medicare Payment Advisory Commission (MedPAC) — arguably the nation's most influential advisory body for national health policy — has recommended that the Centers for Medicare and Medicaid Services (CMS) provide data on risk-adjusted readmission rates confidentially to hospitals3 and disseminate these rates publicly after a 2-year run-in period. MedPAC has also called for the CMS to reduce payments to hospitals that have relatively high readmission rates for certain conditions (e.g., congestive heart failure). Finally, MedPAC has recommended that hospitals be allowed to reward physicians financially for helping to reduce readmission rates and that the CMS establish a pilot program to test bundling payments for an episode of care extending beyond discharge for select conditions. These latter policies, also supported by President Barack Obama's proposed 2010 budget, explicitly recognize the importance of shared accountability.

Although few people argue against educating hospitals about their relative readmission rates, the other policies promoted by MedPAC are more controversial. Publishing readmission rates will invite protest from hospitals, which will be likely to complain that the quality of ambulatory care and physicians' threshold for discretionary admissions — factors that are out of their control — are the predominant determinants of readmission rates. After all, the Dartmouth Atlas of Health Care has shown that admission rates for Medicare enrollees vary by a factor of more than two among different regions in the United States,4 suggesting that there are large differences in the predisposition to hospitalize. Readmission rates are a crude outcome that is difficult to interpret, since higher rates may sometimes represent more efficient care rather than premature discharge, inadequate handoffs, or poor quality of care after discharge. For example, in the case of mild exacerbations of congestive heart failure, early discharge with close follow-up care can both reduce complications associated with longer hospital stays and save money, even if a higher percentage of the discharged patients eventually require readmission.

Although improvement in transitions of care can almost certainly reduce some proportion of readmissions, the magnitude of the reduction is uncertain. The strongest evidence comes from studies of coordination of care for congestive heart failure. A meta-analysis of 18 studies from eight countries showed that comprehensive discharge planning with postdischarge support for older patients with congestive heart failure reduced readmission rates by approximately a quarter and improved patients' quality of life as well.5 However, virtually all data up to the present come from experimental programs at self-selected sites, so generalizability is uncertain.

What, then, is sensible policy going forward? First, we must recognize the challenge as one of creating shared incentives to provide more efficient care and better coordination of care between inpatient and outpatient domains. We should focus initial changes in hospital payment on aspects of care that foster better continuity and for which hospitals are clearly accountable. The CMS's forthcoming pay-for-performance program for hospitals could incorporate indicators that assess aspects of care such as reconciling medication regimens on discharge and again after homecoming, arranging for timely follow-up, and ensuring that outpatient providers have information about the hospital course.

Publicizing readmission rates may also be helpful and would complement the CMS's existing effort to disseminate hospitals' risk-adjusted mortality rates. However, this approach is unlikely to have a large beneficial effect without additional evidence to convince hospitals that high readmission rates represent problems in the quality of their services rather than problems with ambulatory care or with excessively liberal use of hospital services by local physicians.

Providing financial penalties for hospitals that have high rates of readmission is a more aggressive course and one that is especially tempting given the positive reception to the CMS's recent decision to withhold payment from hospitals for preventable complications. Hospitals that are part of an integrated delivery system may respond effectively to lowering payment rates for readmissions, but some very high-quality hospitals may be ill equipped at this time to organize care in the ambulatory sector. Reductions in payment may be necessary to prompt system change but they should be introduced gradually and should be tempered in order to avoid hurting these institutions and to provide them with time to adjust.

MedPACs proposal for bundled payments is designed ultimately to transform the delivery system so that there is an entity accountable for care that crosses different sectors. This is an important goal. Hospital systems that voluntarily participate might accept responsibility for managing the initial hospitalization and transitional and follow-up care and in return would receive a share of any savings garnered by Medicare. If increased gradually, these incentives could foster integration and more effective care. Numerous details would need to be worked out,3 including payment rates; the financial arrangements that would tether hospitals, post-acute care settings, physicians, and other providers together; reinsurance schema that would make the program more acceptable to providers; and safeguards that would ensure that any savings would not be the result of skimping on care. Although piloting this approach seems worthwhile, the likelihood that it will prove to be a successful model is still uncertain.

The interest that policymakers have shown in fostering collaboration between hospitals and physicians in order to reduce high and variable readmission rates is healthy, and ensuring well-coordinated care across all across settings and levels of care is a sure priority.6 Moving forward will require greater integration in the delivery system.7 In many communities, the hospital is not well positioned now to lead the charge for a broad change in ambulatory care. Consequently, providing appropriate incentives for hospitals and community providers to share accountability and provide efficient care will be no easy task. It still seems to be an important goal.

No potential conflict of interest relevant to this article was reported.

Source Information

From the Department of Health Policy and Management, Harvard School of Public Health; and the Division of General Medicine (Section on Health Services and Policy Research), Brigham and Woman's Hospital, Harvard Medical School — both in Boston.

References

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