Readmission Rates And Their Impact On Hospital Finance

Transparency Of Quality Indicators Would Encourage The Patient To Choose A Hospital That Offers Comparatively Better Care

Transparency pertaining to quality of care data as captured through measurement and reporting is a growing issue for hospitals and health services organizations.

The Patient Safety and Quality Improvement Act of 2005, which became a law under the Bush administration, measure outcome and shows complications which show up in readmissions.

The Hospital Readmission Reduction Program (HRRP) was designed as a Medicare value-based purchasing program that decreases payments to hospitals that have disproportionately high readmissions.

Policymakers envisioned that publicly reporting quality measures including readmission rates would increase transparency of the quality of care delivered by hospitals.

Transparency of quality indicators would encourage the patient to choose a hospital that offers comparatively better care as well as provide benchmarks for hospitals as they engage in quality improvement efforts to reduce readmission rates.

Hospitals that have high readmission rates might deter future patients from choosing them.

Reputation for quality has been discussed as a driver for profits through its effect on increased market share and hospitals may have the incentive to decrease their readmission rates to avoid developing a bad reputation.

Furthermore, hospitals get penalized under the CMS Readmission Reduction Program for having excess readmission rates. For instance, as noted by Byrnes et Al, readmission penalties in 2017 exceeded a half billion dollars.

Avoiding these sizable financial penalties is a second incentive for hospitals to reduce their readmission rates.

While being held accountable may create pressure among hospital administrators to reduce readmission rates, reducing readmissions by discharging patients too early may not really be a cost saving or profitable strategy if those patients must return to the hospital.

On the other hand, however, high readmissions rates may be generating an inpatient revenue stream, a problem that policymakers are trying to address.

This is one of the first studies that examines readmission rates and financial performance measures as defined by operating revenues per patient, operating expenses per patient, and operating margin as outcomes.

Link to the study: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6614936/

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