2567 Hospitals Fined $528 Million For Readmissions

There is a lesser-known Medicare program called the "Hospital Readmissions Reduction Program" (HRRP) that was created in 2012 under the ACA.  (It is another one of many hidden success stories of the Affordable Care Act.)  The main goal of this program  (unsurprisingly) is to reduce hospital readmissions.   Why is this important?  That's because his is considered one of the quickest ways to reduce health care spending.  The Network for Excellence In Health Innovation  (NEHI) estimates that $25 billion can be saved annually by reducing hospital readmissions alone.

So the HRRP program seems to be working.  Medicare readmissions were down 100,000 in 2015 and, since 2010, has fallen in every state but one, Vermont.  (Readmission Statistics)

Apparently it still has not been enough.  The CMS just announced that it has levied $528 million in fines to about 2600 hospitals for the upcoming fiscal year beginning on Oct 1st.  If you take into account the ~1400 hospitals that are exempt from this program (e.g., veterans, Children and psychiatric facilities), it comes to a whopping 60% of eligible hospitals who were fined!

Further, the amount of this year's fine is a 20% increase from last year.

So what's happening here?  Readmissions are down but more than half of the hospitals are getting fined.  There are two primary explanations:

• The fines are levied according to the amount of expected readmissions by the HRRP.  So it's possible that they are setting overly ambitious expectations that do not have a connection to real-world scenarios.  
• Many readmissions are simply unpreventable.  The idea is that with better discharge instructions and follow-up communications, patients will adhere to their treatment plans better. In other words, compliance would rise and this would affect the rate of readmission.
• The fines are simply not enough to encourage hospitals to take stronger actions

Nonetheless, an attempt to realize $25 billion in savings is certainly worth a $528 million slap on the hand.  Don't worry, there's a maximum limit to the fines of 3% of their Medicare payments and the average fine levied was only 0.71%.  So the hospitals are are not being fined out of business (as many ACA opponents might complain).

However, the HRRP program  is certainly showing positive results.  Further studies on its effectiveness are pending and should prove very interesting.

If You Need Expensive Prescriptions, Go To Norway.

• In 2015, the total amount spent on prescription drugs in the U.S. was $425 billion (12.2% higher than 2014).
• In 2015, the total amount spent on OTC (over-the-counter) drugs in the U.S. was $32.1 billion ( a modest 4.6% increase).

It's common knowledge that prescription drugs are more expensive in the U.S. than in other countries.  A great article in the Wall Street Journal summarizes the problem:  Why The US Pays More Than Other Countries  (check out the comparison to Norway).

But did you know that OTC (over-the-counter) medicines such as Tylenol, Zantac, and many others are also more expensive in the U.S.?  Probably not.  When drugs like Zantac, Allegra, Claritin got approved for OTC, it wound up costing consumers more to use the same drugs than if they were getting the generic prescription version.

Even commonplace medications such as Tylenol cost more in the U.S.  Why?  Mostly, the answer is just "because".  In other words, Americans are asked to spend more just because the drug companies decided that they should.   This is one reason why medical tourism is so high.  Sometimes, it's the only way to afford expensive, life-saving, medication.  (And don't get me started on the whole Epi-Pen situation.)

U.S. Census Report on Health Insurance

In case you have a lot of free time, the U.S. Census just issued a 44 page report on the state of health insurance in the U.S. for 2015.   This report does not attempt to suggest a cause/effect of the decline in uninsured.  It's "just the facts".  But the facts are fascinating.  You can download a link here:

U.S. Census Report

Key takeaways (in my opinion):

• Percent of Uninsured Americans fell 1.3% to an all-time low

• 29.1 million Americans are uninsured (9.1%) (another all-time low)
• Private insurance continues to be the primary source of health insurance over public insurance (e.g., Medicaid, Medicare, etc.)  67.2% vs. 37.1%
• The breakdown of the types of insurance for 2015 was:

• 28.9 % of noncitizen adults were uninsured.  This is ~2.5x greater than uninsured American citizens (10.8 %) 

The Hospital With No Beds

Fascinating story from CNN Money about a virtual hospital.  This is telemedicine taken to an extreme.  Mercy Hospital is a $54 million facility in St. Louis that offers 24/7 medical via iPads and computers.  It is a prime example of the hi-tech/hi-touch movement.   Using tablets along with biometric sensors, Mercy is able to do almost everything that a traditional home visit used to accomplish.  

It is also an excellent example of how to use "navigators" or "advocates" to help address chronic disease management and readmissions.  Patients of Mercy get "visited" twice a week by navigators. This makes it possible to detect problems early on.  It also reduces unnecessary hospital and doctor visits.  

The Hospital With No Beds

Mamma Said Knock Me Out (But, first, make sure you are in-network)

This week the California assembly passed a bill AB72 that addresses the problem of surprise medical bills.  It awaits the signature of Jerry Brown.  Its goal is to prevent excessive bills from out of network doctors.  It limits the allowable charges for such OON doctors to the average insurer's contract rate or 125% of the Medicare rate, whichever is higher.  Most importantly, it prevents the OON doctor from balance billing for the difference between their rate and the aforementioned limit.

This new law is great, then, right?  Not necessarily.  It can actually deincentivize insurers from negotiating rates if the doctor's rates become controlled by legislation.  That leaves the rates for this part of the health scare system still unregulated.  The result is that these doctors would raise their rates in order to compensate for the lower reimbursements dictated by law.  Who suffers?  The under or uninsured.

What are surprise bills?  The most common example of a surprise, OON bill is for anesthesiologists.  My family has had perhaps a dozen or two procedures over the years requiring general anesthesia.  In every instance, the anesthesiologists were OON even though the hospital and the surgeon were in-network.

Similarly, ER physicians are almost never in network even if an ER facility is.

This has resulted in some very large bills for me because the doctor charges whatever they want and is not bound by any contracted rate with an insurer.  In an emergent situation, an insurer is obligated to process the doctor's bills as in-network and their full amount.  But there's a catch.

If the doctor charges $1000 and the in network contracted rate is $500.  The insurance company will pay 80% of $500 (or whatever percentage is in your plan).  That's $400.  Normally, if the doctor was in network, the patient would be responsible for paying $100.  However, the doctor is allowed to balance bill for the $500 that exceeded the insurer's contracted rate.  So now the patient owes $600!  (Note:  there are restrictions for balance billing in some HMO plans.)

With anesthesiologists, sometimes they will honor the contracted rate and not balance bill the patient.  That has happened about 75% of the time with my family's procedures.  When it doesn't happen, then the patient gets hit with a large bill like above.

So you say, "Just make sure that the ER doctors and anesthesiologists are in network?"  Trust me, that's practically impossible.  I've tried to do this for the local ERs and gave up when no one could help.  For gas-passers, you never know who it is going to be until just prior to surgery.  Surgeons definitely do not like the patient demanding a new anesthesiologist minutes before a surgery.  In fact, they would likely cancel the procedure in such a situation.

Something has to be done about balance billing.  Those bills are a primary cause of medical debt and bankruptcy.  AB 72 is a great start.  However, it is still incomplete and will certainly be challenged in the courts for rate fixing.   I hope that Jerry Brown signs it and we can begin the process to solve this large problem.