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Obama Budget: Hospitals Should Warrantee Admissions for 30 Days

Warrantee Warrantee

War`ran*tee", noun. A written assurance that some product or service will be provided or will meet certain specifications.

Today when we buy practically any consumer item we expect a warrantee.

What’s the “warrantee” after you are discharged from a hospital?

Last September I wrote a post posing the question “What’s the Best Way to Get Hospitals Involved in Care Coordination? ” The short answer was:  Pay them to do it, take money away when they don’t — make hospitals accountable for their role in avoiding unnecessary readmissions.

President Obama’s FY 2010 Budget begins to project savings from avoiding unnecessary hospital readmissions. “Jumpstarting the Economy and Investing for the Future ”  lays the groundwork for hospitals being required to “warrantee” their services:

Improving Care after Hospitalizations and Reduce Hospital Readmission Rates. Nearly 18 percent of hospitalization of Medicare beneficiaries resulted in the readmission of patients who had been discharged in the hospital within the last 30 days. Sometimes the readmission could not have been prevented, but many of these readmissions are avoidable. To improve this situation, hospitals will receive bundled payments that cover not just the hospitalization, but care from certain post-acute providers the 30 days after the hospitalization, and hospitals with high rates of readmission will be paid less if patients are re-admitted to the hospital within the same 30-day period. This combination of incentives and penalties should lead to better care after a hospital stay and result in fewer readmissions—saving roughly $26 billion of wasted money over 10 years. The money saved will also be contributed to the reserve fund for health care reform. [p.28]

Will this be politically challenging? Not likely…this is a continuation of reforms started under President Bush.

The changes will be profound.

Mindset: today, a “discharge” is fixed in time and place — when a patient leaves the building.

Systems and Processes: hospitals will need to extend care and care management into patient’s homes

Information and Communication Technologies : hospitals will need data and remote monitoring technologies to provide care and coordination to patients in their homes

Teamwork: bundled payments will incentivize hospitals and physicians to work together to avoid unnecessary readmissions.

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6 Comments

  1. Paula Suter on February 27, 2009 at 8:53 am

    While I am in full support of reform changes that align goals throughout the healthcare continuum, I do have some reservations related to bundling hospital monies with home care agency monies to prevent unnecessary re-hospitalizations. Could this lead to patients retained longer in institutional settings promoting more institutional care rather than less?



  2. Vince Kuraitis on February 27, 2009 at 11:02 am

    Paula, you’re right — there’s a risk of pendulum swinging too far and encouraging more institutional care.

    I bet we’d agree (at least in concept) that the goal is to OPTIMIZE balance of institutional and home care.

    Thus, the current hospital DRG payment system is focused on minimizing hospital stay — there is no penalty for avoidable readmisssion; instead there’s a financial reward.

    The right financial bundling formula will require tweaking. For a good read, see NHRI/RWFJ reports at http://www.nrhi.org/reports.html .



  3. Randy Williams on February 27, 2009 at 12:33 pm

    A long overdue move in the right direction. While none of the steps outlined by Vince will be easy, several progressive hospitals are well down the road on this approach, and in my opinion, have been rate limited ONLY by the right economic incentive structure.

    With that potentially out of the way, the next largest challenge will be getting the “team” to act like a team. Easier for integrated systems, maybe, but not impossible even in a “virtual” delivery network.



  4. Al Lewis on March 4, 2009 at 11:54 am

    I thought the DRGs already covered same-cause readmissions within 30 days. Is that accurate? I imagine that was easily gamed by changing the discharge Dx the second time.



  5. Vince Kuraitis on March 4, 2009 at 1:11 pm

    Al,

    You’re describing what I’d call is a common misperception. I thought the same thing for a long time.

    As best as I can determine, regional Medicare payment organizations DO have discretion not to pay hospitals for readmissions occurring under certain circumstances. As a practical matter, however, these policies are highly variable and not in any way a part of national Medicare policy.

    Best as I can tell (informally), as a practical matter today very few hospitals actually get dinged by Medicare when a readmission occurs, even though technically the threat is there.

    Bottom line: this policy today is governed by informality, discretion, and non-enforcement.

    I have never seen a systematic analysis of the current state of policy, but would be interested if anyone can shore more analysis or anecdotes.



  6. Vince Kuraitis on March 4, 2009 at 1:21 pm

    Al, for more info on Medicare’s planning process see:

    REPORT TO CONGRESS:
    Plan to Implement a Medicare Hospital
    Value-Based Purchasing Program
    November 21,2007

    http://www.healthcare.philips.com/phpwc/us/about/reimbursement/assets/docs/medicare_report_hospital_value_based_purchasing.pdf