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New Changes for Readmissions

DATE: November 8, 2017

Socio-demographic adjustments to the Readmissions Reduction Program are here

The cost of readmissions is a critical issue facing the healthcare industry. In 2014 alone, roughly 1.8 million readmissions cost Medicare $24 billion. The Readmissions Reduction Program (RRP) was implemented as part of the Affordable Care Act to reduce this spending to account for certain excess readmissions. As with any program, the Centers for Medicare & Medicaid Services (CMS) makes refinements over time.

One change is the 21st Century Cures Act, which requires CMS to implement an adjustment to RRP based on socio-demographic status (SDS). This change is a result of hospitals asserting that some populations, vulnerable due to socio-demographic challenges, were more likely to be readmitted
than patients from less socially disadvantaged areas.

CMS has closely reviewed reports by the Office of the Assistant Secretary for Planning and Evaluation and the National Academies of Sciences, Engineering and Medicine on the issue of accounting for social risk factors in CMS’ quality programs, and has listened to the industry. This has resulted in an interim adjustment to RRP for federal fiscal year (FFY) 2019, included in the FFY 2018 Inpatient Prospective Payment System final rule. This interim methodology consists of:

  1. Grouping: Hospitals will be grouped into national quintiles based on their ratio of full-benefit dual eligible patients to total Medicare FFS and
    Medicare Advantage patients.
  2. Comparison: Hospitals will then be compared to the condition-specific median excess ratio of all hospitals within their quintile.
  3. Adjustment: The SDS adjustment is budget neutral nationally. The Medicare savings using the current methodology in the RRP program will be the same as the Medicare savings with the SDS adjustment.

Hospitals in the higher quintiles (higher percentage of full-benefit dual eligible patients) will have a less stringent benchmark; hospitals in the lower quintiles (lower percent of full-benefit dual eligible patients) will have a more stringent benchmark.Therefore, although the program is budget neutral nationally, there will be winners and losers within each quintile.

CMS has not provided the file it will use to identify full-benefit dual eligible patients. DataGen used a proxy to estimate the impact of the SDS adjustment. The cutoff full-benefit dual eligible ratios for quintile distribution using the proxy data sources are as follows:

  • Quintile 1: 0%–12.05%
  • Quintile 2: 12.06%–15.98%
  • Quintile 3: 15.99%–20.16%
  • Quintile 4: 20.17%–27.02%
  • Quintile 5: 27.03%+

The figure above offers a view of which states will have a larger proportion of Quintile 1 hospitals, and which will have a higher proportion of Quintile 5 hospitals. This figure is based on proxy data and represents our assumptions of how CMS will define these quintiles.

Based on their own data, hospitals should be able to determine where they may fall in the SDS quintile distribution. DataGen is analyzing the impact of the estimated SDS adjustments to each hospital’s RRP performance and the resultant change in reimbursement.

Click here for your copy of New Changes for Readmissions. For more information, contact DataGen and follow us on LinkedIn.

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