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New Report: Readmissions Reduction Program Doesn’t Increase Observation Stays

Through Congressional direction and previous Administration initiatives, Medicare has implemented incentives to reduce hospital readmissions. One example is the Hospital Readmissions Reduction Program (HRRP), which financially penalizes hospitals with relatively high rates of Medicare readmissions.


One of the criticisms of the program has been the anticipation of an increase in the number of observation stays—that is, to avoid readmission penalties, providers are placing these patients in “observation” rather than readmitting them.


A new analysis of the program, however, reports the program is not increasing the number of observation stays. The Medicare Payment Advisory Commission (MedPac) analysis noted that there is no evidence of an increase in observation stays because of HRRP.


Readmission rates from 2010 to 2016 for heart attacks, heart failure and pneumonia all dropped between 1.4 percent to 3.6 percent, saving Medicare $2 billion annually, according to MedPAC’s analysis recently sent to Congress. Over that same period, the commission found only a small increase in observation stays and noted that the increase did not offset savings from the readmissions program. (“Medicare readmissions program not causing observation stay spike,” Modern Healthcare A.M., June 18, 2018)


MedPac said in its report that “. . .  the reduction in readmission rates reflects real changes in practice patterns and not simply a shifting of short-stay admissions into observation stays to avoid readmission penalties.” (Report to the Congress, Medicare and the Health Care Delivery System, MedPac, June 2018)


However, some industry analysts dispute the validity of MedPac’s findings.  One noted that the analysis relied on observational studies that are prone to bias. Other studies found evidence that the readmission program does increase the duration and frequency of observation stays.


To read MedPac’s report to Congress, please click here.



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