Sometimes it’s hard to discern the ‘narrative’ of Philips Telehealth and its business in US. We know their moves tend to be quiet [TA 1 Feb] worldwide. When there is activity, their communications tend to underplay, which makes it a little unclear about the markets they are developing. But here are two announcements, same day, that may mark a livelier trend. First, Philips announced a ‘Hospital to Home’ initiative (not explained) and as part of this, is premiering an advanced version of its telehealth software at the annual meeting of the NAHC (National Association of Home Care and Hospice) in Las Vegas this week for wide release in December. According to their press release, the software improves monitoring capabilities in disease management, clinical decision support, workflow, data collection and reporting, specifically to reduce hospital readmissions. (Now finally a major effort in the US as CMS is now penalizing for same-cause readmissions in 30 days; see Comments for an explanation of this.) Release. Now a second release also from Friday: Philips announced agreements with eight sizable home care providers across the country, at least four of which are part of hospital systems. Exactly how this is being implemented (and if Philips is supporting these home care providers with integrated services) is a question. Time will tell. Release.
Hospital Readmissions – The Real Story
It has been a year now and the realities of this provision of the law are just now beginning to come to the full attention of hospitals and the healthcare community. It seemed at first that because there would be no effect on payments until 2013 that there would be time to work this all out.
The initial efforts will aim at three disease areas: Heart Failure (HF), Acute Myocardial Infarction (AMI),and Pneumonia. These three will be followed beginning in FY 2015, when the list of conditions will grow to include Chronic Obstructive Pulmonary Disease (COPD), Coronary Bypass Grafting, Percutaneous Coronary Interventions and Vascular Procedures.
There is much misinformation about how readmission penalties will work. The most common error is that there will be denial of payment for services provided to an individual patient that is readmitted within the specified time frames. The concept of Medicare payments to hospitals has long relied on averaging, a process that is inherent in the structure of Medicare’s Diagnosis-Related Group (DRG) based inpatient retrospective payment system (IPPS) and the readmission formulas will also work on the principle of averaging. The penalties will begin to be assessed on the lowest performing 25% of hospitals based on the average readmission rates for the specified diseases over 7 day, 15 day, and 30 day readmissions. There is a complicated formula that will begin by using the data from October 2011 and 2012. The first payment assessments will be made in 2013 and will be 1.15%, 1.77% and 2.38% for readmission windows 30, 15 and 7 days, respectively. The penalties will be based on total Medicare billings, not just the readmission billings. and to help phase in the impact the penalties will be capped at 1% in 2013, 2% in 2014, and 3% 2015. This percentage is assessed against the hospital’s total Medicare billing, not just the billing of the payments for the readmissions.
For example: A hospital in the lowest 25%, with total annual Medicare billings of $20,000,000 in 2013,could lose at the capped rate of 1%, $200,000 in 2013 $400,000 in 2014 and $600,000 in 2015 based on the statistics from October 2011 and forward.
If this is not bad enough, what will happen when private insurers follow Medicare’s lead as they so often do? Those CFOs in the corner office which have been quietly happy about the added billing of readmissions will soon be singing another tune when this reality hits home. And at this stage of general awareness, it may be their auditors that deliver them the bad news when they explain that they will be adding a note into the hospital’s financial statements about this potential liability that the hospital could be facing in 2013.
John also wanted to point out the CMS document:
[b]CMS Releases Medicare IPPS Payment Rules for FFY 2012[/b]; Proposal Includes Rules to Establish the ACA’s Inpatient Readmissions Payment Policy Effective FFY 2013 and New Policy Proposals for the FFY 2014 Inpatient VBP Program.