Medicare Could Lower Long-Term Costs, Avoid Physician Fee Cuts By Reducing Hospital Readmissions, Opinion Piece Says

Main Category: Medicare / Medicaid / SCHIP
Article Date: 15 Aug 2008 - 8:00 PDT

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Reducing hospital readmissions by Medicare beneficiaries could play a large role in reducing program spending enough to avoid cutting physician fees, Robert Pozen, a trustee of the Commonwealth Fund, and Cathy Schoen, senior vice president of the fund, write in a Boston Globe opinion piece. According to Pozen and Schoen, Medicare must reduce expenses by $20 billion annually over a decade beginning in 2010 to avoid reducing fees to physicians.

They write that "there is a straightforward way to pay for half of this fix" through reducing hospital readmissions. The authors note that a Medicare Payment Advisory Commission study found that 75% of all 30-day hospital readmissions of Medicare patients in 2005 were potentially preventable -- or 13% of total admissions. If these readmissions were eliminated, Medicare could save $12 billion annually, or more than half of its unfunded liability, according to the authors.

According to Pozen and Schoen, in order to achieve these savings, Congress should address three objectives: decreasing complications during hospital stays, improving patient communication during the discharge process and tracking patients after discharge. However, for these measures to work, "Medicare needs to create the right incentives" because hospitals currently receive higher payments for patients being treated twice, according to the authors. The authors write that Congress should require readmission rates to be public. They continue that hospitals whose readmission rates are above the national average should receive lower reimbursements for a beneficiary's second stay, while hospitals who have rates lower than the national average should receive higher reimbursements for a beneficiary's first hospital stay.

The authors conclude, "With the right incentives in place, Medicare should generate over $100 billion in savings over the next decade by bringing the high-cost areas down to the national average on 30-day rehospitalizations" (Pozen/Schoen, Boston Globe, 8/14).

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