Highlight on Missouri: hospital challenges readmission formula, says socioeconomics should factor in

Missouri-based Christian Hospital is challenging the way that Medicare calculates penalties for hospital readmissions. With the backing of the Missouri Hospital Association, the hospital asserts that Medicare’s Hospital Readmissions Reduction Program (HRRP) does not adequately account for the socioeconomic status of the patients that a hospital treats. The hospital and the hospital association argue that the methodology unfairly penalizes safety-net hospitals.


The HRRP, created by Section 3025 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), requires CMS to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions. CMS defines readmission as “an admission to a subsection (d) hospital within 30 days of a discharge from the same or another subsection (d) hospital.” CMS was obligated, under the program, to develop a formula to calculate an excessive readmission ratio based upon a national average of hospital performance. Medicare bases readmission penalties on the care of Medicare patients who were originally hospitalized for one of five conditions—heart attacks, heart failure, pneumonia, chronic lung problems, and elective hip or knee replacements. In 2015, the fourth year of the program, 2,592 hospitals were penalized due to high rates of readmissions. Overall, hospitals were penalized a total of $420 million last year.


Under current reimbursement rules, Christian Hospital is expecting to lose $600,000 in reimbursement due to what CMS deems “excessive readmissions.” However, the hospital believes the reimbursement penalty is improper because the formula used to derive the $600,000 figure does not factor in relevant socioeconomic disadvantages of certain patients. For example, the hospital believes that high numbers of patients with low-incomes, poor health habits, and chronic illnesses increased its readmission numbers. If CMS used readmission criteria that factored in those socioeconomic factors, Christian Hospital says its HRRP penalty would have been $140,000.

Missouri Hospital Association

The Missouri Hospital Association is putting its support behind Christian Hospital. The organization revamped its consumer-focused website, Focus on Hospitals, to include readmissions statistics that conform to the methodology Christian Hospital is asking CMS to use. The Focus on Hospitals website adjusts hospital readmission statistics in accordance with patients’ Medicaid status and neighborhood poverty rates. In support of its readmission statistic methodology, the hospital association says there is research that suggests “poverty and other community factors” increase the likelihood readmission to a hospital. The alternative data arises from a study commissioned by the Missouri Hospital Association. That study found that hospital readmission rates improved by between 44 and 88 percent when patients’ poverty levels were factored in.


In addition to avoiding penalties, together with the Missouri Hospital Association, Christian Hospital is hoping that its efforts will lead to changes in Medicare law. Specifically, Christina Hospital is seeking the kind of change envisioned by a piece of legislation known as “The Helping Hospitals Improve Patient Care Act.” The bill would alter the way socioeconomic status is considered under the HRRP. Specifically, the legislation would require a transitional risk-adjustment methodology to serve as a proxy of socio-economic status until a more refined methodology can be developed.


The concerns over the methodology echo similar complaints that hospitals have made about Medicare’s five-star rating system. Whether the issue is readmissions or ratings, interests are in conflict—CMS struggles to find a way to incentivize quality care while hospitals worry that they may be unfairly punished or penalized for treating certain populations. From the perspective of Christian Hospital in Missouri, the current balance is unfavorable.  But the question isn’t whether someone should be held accountable for unnecessary readmissions. The question is whether the scales are tipped unfairly.

Two small words may help avoid the sting of a malpractice trial

Some patients hold the position that an apology would soothe many wounds caused by physician mistakes. In most states, 36 to be exact, a medical professional’s apology cannot be thrown back at in his face in court. Patient advocates say that those who have been injured but who have received an apology are more likely to negotiate settlements rather than take a case to a trial that could end up with a large jury award. In a country where malpractice payouts equaled almost $4 billion in 2014, such a tactic may be extremely useful for doctors and health systems.

Admission of guilt or admission of kindness?

Some physicians and hospitals used to believe that the less said about medical errors, the better. Even in the beginning of 2010, a shift appeared to be taking place. Doctors realized that explanations and apologies made patients feel heard and important. The University of Michigan Health System (UMHS) began offering apologies and providing the opportunities for discussion when clinical problems arose. UMHS even believes that confronting mistakes and errors in this manner allows an opportunity to learn, which helps prevent them from happening again.

UMHS reported that they shifted from a system of litigation to a claims management model that starts with legal assessment, investigation, analysis, and patient engagement. Sometimes these cases still lead to litigation, but they may lead straight to a settlement or defer a claim altogether. UMHS stated that its number of claims and lawsuits has dropped dramatically since 2001, and that the average legal cost per case has dropped by over half since 1997.

Legal protections in most states

“I’m sorry laws,” more formally known as Medical Professional Apologies Statutes, protect parties from having their condolences or even apologies used against them in court. Many states have a citation for general sympathetic gestures, including apologies, although Illinois’ was declared unconstitutional by the state’s Supreme Court. Six states even have a protection statute specifically related to sympathy and apologies offered in relation to an accident: California, Florida, Massachusetts, Tennessee, Texas, and Washington.

Do patients want to sue?

Leilani Schweitzer, a mother whose one-year-old son died due to a nurse’s mistake, spoke to CNN Health about how she actually did not want to sue. Schweitzer accompanied her son from a hospital in Nevada to one of the best children’s hospital’s in the country, at Stanford, and a sympathetic nurse turned off the loud alarms connected to the patient’s heart to allow Schweitzer to rest. Although the nurse believed that she only turned off the alarms in the patient’s room, she unwittingly turned them off on her pager and at the nurse’s station. The boy died when no alarms alerted medical personnel to his stopped heart.

Schweitzer was offered a full apology, explanation, and unsurprisingly, a financial settlement. Stanford went a step farther, however, and involved Schweitzer in its steps to prevent a recurrence. Years later she was hired as a consultant to reach out to patients after similar issues, and she eventually landed as the assistant VP of communication and resolution–and gave a TEDx talk on transparency, compassion, and truth in medical errors. She emphasized that harmed patients and their loved ones generally do not want to sue, but retain lawyers after they feel that no one is listening or giving them a straight story.

In contrast, Deborah Craven filed a complaint after she believed surgeons tried to hide their mistake: removing the wrong body part. A precancerous lesion was found on her eighth rib, but the surgeons removed part of the seventh instead. When Craven complained of pain after surgery, her doctor took an x-ray and discovered the issue. Another doctor showed up five minutes later and changed the story, telling Craven and her husband that they simply failed to remove enough of the correct rib. Although Yale New Haven Hospital claims that it offered an apology, Craven’s lawyer disagreed. Her lawyer also points out that she did not want to sue immediately, but approached the hospital about a resolution. The hospital decided the case was not significant enough.

It seems that an apology and an explanation is a large portion of what patients feel that they are owed when they file a lawsuit seeking a financial settlement. As hospitals shift from “deny and defend” mode, they may find that the extra face time with patients results in less time, and money, in court.

Value-based purchasing may not be encouraging much improvement

To improve the Value-Based Purchasing (VBP) program CMS should address four concerns, according to a report by David Muhlestein, Ph.D., J.D., of Leavitt Partners. CMS should (1) empirically evaluate whether penalties are large enough to lead providers to make changes across the four domains; (2) structure quality measures so that only meaningful differences in performance lead to meaningful differences in payments; (3) decrease the measurement volatility by increasing the number of cases for each of the metrics and creating an alternative VBP program for low-case volume hospitals; and (4) consider urging Congress to reconsider combining the VBP program with the readmission and hospital-acquired conditions (HAC) reduction to better align measures across programs, the report recommended.


The VBP program was implemented by CMS in 2013 under Section 3001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-14) as one of three value-based programs for hospitals. The VBP program is different from its counterparts in that it is structured to be revenue neutral, allowing some hospitals to receive bonus payments while others receive penalties for inpatient payments. It also evaluates performance across four weighted domains: clinical process of care (10 percent), patient experience of care (25 percent), clinical outcomes (40 percent), and efficiency (25 percent).

Estimated impact on financial performance

For hospitals involved in the VBP program, an average of 35.4 of discharges are paid for by Medicare, and 46.1 percent of revenue comes from inpatient care. Because the VBP modifier only affects Medicare inpatient care, the modifier can only affect about one-sixth of hospital revenue. The report estimates that, for FY 2016, the VBP modifier will affect a hospital’s income with a maximum 0.35 percent decrease in total revenue or a maximum 0.8 percent increase in total revenue. However, the report estimates that only 4.9 percent of hospitals will see a penalty or bonus payment that exceeds 0.25 percent of net revenue. Of those hospitals, only 8.3 percent will be penalized.

Performance over time

Hospitals may improve their performance each year. The report shows that, between 2015 and 2016, 45 percent of hospitals received bonuses in both 2015 and 2016, while 30 percent were penalized both years. About 25 percent of hospitals made a change between the two categories, with 11 percent moving from bonus to penalty and 14 percent moving from penalty to bonus. The report also classified hospitals into quintiles based on their 2015 and 2016 performance and found a surprising amount of movement between the quintiles, with 40 percent moving up or down one quintile, 13 percent moving two quintiles, 4 percent moving three quintiles, and 1 percent moving four quintiles.

Policy implications

While the VBP program is intended to give incentives for hospitals to improve their quality of care, the relatively small financial incentives may not be sufficient enough to justify the high investment required to implement significant changes for many hospitals, especially considering that the potential for return is unknown. More work needs to be done, the report stated, to determine whether hospitals that had higher penalties improved more than those with smaller penalties or bonuses. To encourage improvement, the report suggested moving toward measures that have clear pathways for improvement, with such measures weighted higher than those with a more nebulous pathway toward improvement. To allow hospitals clearer performance benchmarks, the report also suggested limiting measures used in the program to those where there is a meaningful distribution of performance, limiting the number of potential scores in each category to those that are substantially different.


High levels of volatility in VBP program results may indicate that the program is not adequately measuring true underlying quality and that program measures may be susceptible to random variation, as opposed to a hospital actually alternating between worsening and improving every year. Because smaller facilities tended to be more volatile, the report suggested creating an alternative program for those smaller hospitals to allow better monitoring of changes in quality.

Overlap with other Medicare initiatives

Measures within the VBP program, the Hospital Readmissions Reduction Program (HRRP) and the Hospital Acquired Conditions (HAC) reduction program are not fully coordinated, the report noted. Rather than administering separate programs, the report suggested urging Congress to combine the programs into one to better align all quality and performance measures across programs, allowing hospitals to be better-positioned to prioritize their efforts.