The ACA and the Hospital Readmissions Policy Debate

May 6, 2013

Of the Affordable Care Act’s (ACA’s) many provisions aimed at improving health care access, quality, and efficiency, one has been the subject of considerable recent debate: the hospital readmission reduction program. The program’s approach has some merit, but in the end, doesn’t do enough to address the systemic issues underlying the problems it aims to fix. This policy needs adjustments now and bigger changes down the road.

Hospital readmissions within 30 days of initial hospital stay became a policy focus after a report by the Medicare Payment Advisory Commission (MedPac) in 2007. MedPac identified some types of readmissions—in particular, those linked to diagnoses like acute myocardial infarction, congestive heart failure, and pneumonia—as potential indicators of quality problems in the initial hospital stay.

MedPac recommended a readmission reduction program in 2008, but most hospitals didn’t focus on readmissions seriously and systematically until payment penalties for certain readmissions were included in the Affordable Care Act. Two-thirds of hospitals are now facing readmission penalties totaling approximately $280 million in 2013. We summarized some of the key initiatives underway to reduce readmissions, along with research results to date, in a policy paper.

Recently, readmission rates have been on a downward trend, and some analysts see this as a positive outcome attributable to the ACA’s readmission penalties.

Some hospitals, however, have raised concerns about the wisdom of the policy.

Payers tend to view the program favorably for several reasons. First, there are significant dollars associated with readmissions. In 2008 alone, Medicare spent $15 billion on readmissions for just 18 percent of inpatient patients. Second, readmissions can be measured without too much difficulty. The data are readily available through payers’ claims systems. And third, the issue is a hot media topic. That means health purchasers and decision-makers—both employers and members of Congress—are looking to Medicare and private payers to do something about it.

But the very attributes that make the program attractive to payers are symptomatic of the problems with this policy. For example, claims data are not clinically sensitive measures of care. Recent analyses of readmissions penalties indicate that hospitals treating patients on the low end of the socioeconomic scale generally face higher penalties than hospitals treating more affluent patients. Because there may be clinically appropriate reasons for those with low socioeconomic status to have higher readmission rates, penalizing such hospitals may actually interfere with good care.

Media focus on issues like this one often leads to the over-simplification of the issue into sound bites, which in itself can interfere with good policy. Once the media are involved, calls for quick responses often follow, potentially leading to punitive approaches rather than more complex but longer-lasting strategies involving structural change in the healthcare system.

Certainly, the readmissions initiative has led to some positive change. Many hospitals now have a special focus on helping patients make the transition from inpatient care to outpatient or community settings, and that is an improvement over historical care silos. And there are ways to adjust the methodology of the current policy to mitigate some of its negative unintended consequences.

The readmissions policy will continue to spark changes in the system, but in the end, it will be eclipsed by the more systemic approaches to payment reform and coverage scope also included in the ACA—and that is a very good thing.