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New Research on Medicare Policy for Hospital-Acquired Conditions: A Clarion Call for Risk Adjustment

September 8, 2015

If the AAMC and I have said it once, we’ve said it a thousand times to the Centers for Medicare and Medicaid Services (CMS), the National Quality Forum, MedPAC, Congress, the White House, and others.

The federal government’s effort to shift from a Medicare reimbursement system based on volume to one based on value, while critically important, is doomed to fail unless it adjusts for the varying degrees of risk different providers bear based on their patient populations. Thus far, all of our calls have fallen on deaf ears.

New research out of the Feinberg School of Medicine at Northwestern University, recently published in The Journal of the American Medical Association (JAMA), helps prove our point. The research demonstrates that however well intentioned, Medicare’s new reimbursement penalties against hospitals whose rates of hospital-acquired conditions (HACs) exceed federal targets are grossly unfair.

Teaching hospitals and other hospitals that serve a large share of sicker and poorer patients are disproportionately represented among the list of 721 hospitals that saw their FY 2015 Medicare reimbursement reduced by 1 percent as a result of low scores on last year’s federal metrics.

Consider these findings from the study by Karl Y. Bilimoria, MD, MS, and his seven coauthors: 42 percent of major teaching hospitals and 62 percent of “very major” teaching hospitals—those facilities with the highest resident-to-bed ratios—were penalized, compared with only 22 percent of all hospitals and only 17 percent of nonteaching hospitals. Many of the nation’s most prestigious hospitals in major U.S. metropolitan areas—Boston, New York City, Philadelphia, Cleveland, Chicago, Dallas, Salt Lake City, San Diego, Seattle, and more—were penalized. These are hospitals that often score significantly better on other public measures of quality and outcomes. On the HAC metrics, however, they score much lower.

Equally telling is that 24 percent of hospitals accredited by the Joint Commission—the private entity that audits hospitals—were penalized compared with 14 percent of hospitals that are not accredited.

The fact is that hospitals that score the lowest on HAC metrics see the sickest, poorest patients with the most complex illnesses and conditions—the people whose health and socioeconomic status make them much more likely to have longer hospital stays and, therefore, to be more vulnerable to acquiring an infection or other condition while in the hospital.

The HAC metrics cry out for additional reassessment and adjustment, but CMS—the agency that administers Medicare—continues to refuse to make such adjustments. Its explanation? All providers should be held to the same standards. Otherwise, consumers can’t get a “fair” picture of which providers are best and which are not.

Providing the highest-quality care for all patients, especially those with the most complex conditions and who are the most vulnerable, is the highest priority for teaching hospitals, which is why ignoring risk adjustment makes no sense to me. In fact, it’s completely perverse. Refusal to adjust for risk adequately encourages clinicians and hospitals to avoid poorer, sicker patients, which is the opposite of what reimbursement reforms authorized by the Affordable Care Act should be doing.

Congress and the administration can be painfully slow to fix Medicare reimbursement problems, even when shortcomings of current policies are overwhelmingly apparent. It took Congress 18 years to repeal the Medicare sustainable growth rate (SGR) and rectify the huge mistake it made in 1997, putting Medicare reimbursement for physicians on a path to be dramatically reduced. Almost everyone—including members of Congress—expect this change will lead to greater patient care access.

Now that Congress has finally enacted a permanent end to the cuts in Medicare reimbursement for physicians and put their reimbursements for care on a new path, the time is long overdue to get new Medicare reimbursement policies for hospitals right, too. We need to begin by establishing appropriate risk adjustment to ensure that payment policies fulfill their intended purpose—improving access to high-quality care at the lowest cost.

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About the Author

Atul Grover, MD, PhD AAMC Executive Vice President

Atul Grover, MD, PhD
AAMC Executive Vice President

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For More Information

Peters Willson
Sr. Specialist, Policy and Constituency Issues
Telephone: 202-862-6029