Brought to life as part of the Affordable Care Act, the federal government has imposed readmission penalties to healthcare facilities that have too many patients returning for care within a month of their initial discharge. These penalties may be steep, resulting in millions of dollars in avoidable losses. For long-term care facilities like nursing homes, these Medicare-related penalties may endanger the continuation of care for patients. Nursing home insurance is designed to help protect against losses, but it is critical that insurance clients understand the implications of readmissions penalties as part of an overall risk management strategy.
Hospital Readmission Reduction Program: Facts and Figures
Hospitalizations can be extremely stressful for any patient, but pose particular challenges for patients receiving care under Medicare. Many Medicare patients are elderly, and many of those patients receive care at skilled nursing and long-term care facilities. In order to combat high rates of patient readmissions, the Medicare system implemented the Hospital Readmission Reduction Program (HRRP), which took effect in October, 2012. This program imposes financial penalties to those healthcare facilities with above-average hospital readmission rates. Prior to HRRP, healthcare facilities had few, if any, financial incentives to reduce readmission rates, and those rates began to soar, leading to changes at the federal level. In the United States, many older adults are simply not ready to go home after leaving hospital care, and about 20% of these patients are discharged to nursing facilities for follow-up treatment.
In the first year of HRRP, over 2000 healthcare facilities were penalized. Penalties totaled $280 million in 2012. The figures have grown in subsequent years, despite the specter of excessive costs. For example:
- 2017’s penalty total rose to $528 million – over $100 million more in penalties than in 2016.
- In 2018, healthcare facilities in the state of Indiana saw their Medicare payments docked by $12 million, a figure almost double that of penalties imposed three years earlier.
- Approximately half of all healthcare facilities in the United States will face some level of Medicare payment cuts in fiscal year 2019 under HRRP.
Combating Readmission Penalties
Millions of dollars in Medicare payment penalties represent a significant financial incentive for healthcare operations, including nursing home facilities. These penalties can negatively impact business operations, and may ultimately influence delivery of care for patients. In order to reduce readmission rates and to lower the potential for penalties under HRRP, hospitals and nursing homes have implemented two primary strategies.
The first strategy is for healthcare facilities – especially skilled nursing facilities — to improve clinical capabilities in-house, including provisions for medication, after-care instructions, and rehabilitative therapies. Patient education and post-discharge appointments with primary care managers also enhance care for America’s elderly patients, helping to reduce readmission rates. High penalties have also led nursing homes to evaluate staffing levels, providing incentives for facility administrators to eliminate understaffing in an effort to provide superior post-discharge care.
The second strategy revolves around nursing home insurance. As part of a risk management strategy, this professional liability insurance solution is designed to protect the financial assets, staff, and patients of a nursing facility in the face of business interruption losses that may result from readmissions penalties. Many nursing home insurance policies include risk management programs geared toward helping healthcare facilities avoid financial losses in the first place. With improved staffing and care at the nursing home level, hospital readmission rates in our nation’s hospitals can be reduced. This has the added benefit of reducing financial reimbursement penalties under Medicare programs, allowing nursing homes to continue delivering the care their patients rely on.
About Caitlin Morgan
Caitlin Morgan specializes in insuring assisted living facilities and nursing homes and can assist you in providing insurance and risk management services for this niche market. Give us a call to learn more about our programs at 317.575.4440.