Will Medicare Readmission Penalties Motivate Hospitals to Reduce Arthroplasty Readmissions?

• Published in: The Journal of arthroplasty Vol. 32; no. 3; pp. 709 - 713
• Main Authors: Clement, R. Carter, MD, MBA, McAuliffe, Caitlin L., MD, MBA, Kheir, Michael M., MD, Derman, Peter B., MD, MBA, Speck, Rebecca M., PhD, Levin, L. Scott, MD, FACS, Fleisher, Lee A., MD
• Format: Journal Article
• Language: English
• Published: United States Elsevier Inc 01.03.2017
• Subjects: Arthroplasty, Replacement, Hip - economics; Arthroplasty, Replacement, Knee - economics; Costs and Cost Analysis; Hospitals; Humans; Medicare - economics; Medicare - legislation & jurisprudence; Orthopedics; Patient Readmission - economics; Patient Readmission - statistics & numerical data; reimbursement penalties; Retrospective Studies; Risk Adjustment; the Centers for Medicare & Medicaid Services (CMS); total hip arthroplasty (THA); total joint arthroplasty (TJA); total knee arthroplasty (TKA); United States; unplanned readmissions; Total Hip Arthroplasty (THA); Reimbursement Penalties; Total Joint Arthroplasty (TJA); Unplanned Readmissions; Total Knee Arthroplasty (TKA); The Centers for Medicare & Medicaid Services (CMS); reimbursement penalties; total knee arthroplasty (TKA); unplanned readmissions; total joint arthroplasty (TJA); the Centers for Medicare & Medicaid Services (CMS); total hip arthroplasty (THA)
• ISSN: 0883-5403; 1532-8406
• DOI: 10.1016/j.arth.2016.08.031

Abstract Background The Centers for Medicare & Medicaid Services (CMS) recently imposed penalties against hospitals with above-average 30-day readmission rates following total joint arthroplasty (TJA). Hospitals must decide whether investments in readmission prevention are worthwhile. This study examines the financial incentives associated with unplanned readmissions before and after invocation of these penalties. Methods Financial data was reviewed for 2,028 consecutive primary TJA’s performed on Medicare beneficiaries over a 2-year period at an urban academic health system. Readmission penalties were estimated in accordance with CMS policies. Results Unplanned readmissions generated a $4,416 median contribution margin. The initial hospitalizations (when the TJA was performed) were financially unfavorable for patients subsequently readmitted relative to those not readmitted due to increased costs of care (P=0.002), but these costs were more than outweighed by the increased reimbursement earned during the readmission (P<0.001), ultimately making readmitted patients financially preferable (P<0.001). Going forward, penalties will be levied for risk-adjusted readmission rates above the national rate of 4.8%. For the institution under review, the penalty per readmission outweighs the financial gains earned through readmission by $12,184, resulting in a net loss from readmissions if the rate exceeds 6.5%. It will be financially optimal to maintain a readmission rate (after risk adjustment) equal to the national average, but exceeding that rate will be $7,768 more expensive per readmission than under-shooting that target. Conclusion If our results are generalizable, unplanned Medicare readmissions have traditionally been financially beneficial, but CMS penalties outweigh this benefit. Thus, penalties should incentivize institutions to maintain below-average arthroplasty readmissions rates.