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New Analysis Shows Hospital Readmissions More Than Double Medicare Episode Payments

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A comprehensive analysis of Medicare claims data demonstrates that Medicare payments more than double when the beneficiary’s care includes at least one hospital visit. The Alliance for Home Health Quality and Innovation (the Alliance) released the fourth and final working paper in its Clinically Appropriate and Cost-­‐Effective Placement (CACEP) research project examining the effects of hospital admissions and readmissions on Medicare expenditures.

Hospital readmissions play a key role in the amount Medicare spends per episode per patient. The CACEP research aims to help policy-­‐makers and the health care community more fully understand how hospital admissions and readmissions across post-­‐acute, pre-­‐acute and non-­‐post acute care episodes affect the Medicare episode payment. These results can provide guidance on the future of the Medicare home health benefit.

“This working paper offers a detailed snapshot of the role of hospital readmissions during all three episode types based on various factors,” stated Allen Dobson, Ph.D., CACEP lead researcher and President of Dobson DaVanzo & Associates, LLC. “The data will prove invaluable to lawmakers as they look to revamp the Medicare fee-­‐for-­‐service payment system and eliminate unnecessary spending on avoidable hospitalizations.”

In post-­‐acute care episodes, patients whose episode contained at least one readmission cost Medicare twice as much -­‐ roughly $33,000 compared to $15,000. When the number of chronic conditions per patient increases, so does the average number of readmissions, suggesting that a more complex patient is more likely to be readmitted. Services such as home health may be able to reduce the number of unplanned readmissions for some clinically appropriate patients by caring for them in home health and improving coordination and continuity of care.

While pre-­‐acute care episodes often do not contain an admission prior to the Index stay, there are interesting trends when an episode contains an admission. With regard to chronic conditions, the severity of the primary chronic condition, rather than the number of conditions, plays a more significant role in the impact on Medicare payment for the episode. For example, an episode with a primary chronic condition of diabetes and a prior admission generates a Medicare episode payment nearly three times that of a diabetes episode without a prior admission. This suggests that better management of low-­‐severity chronic conditions (as well as high-­‐severity conditions), which can be provided by home health care, may limit prior admissions for pre-­‐acute episodes or even prevent some hospital admissions and subsequent post-­‐acute care.

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