Medicare Payment Advisory Commission (MedPAC) and other proponents of the
Hospital Readmissions Reduction Program (HRRP) justified their support for the
HRRP with the claim that research had already demonstrated how hospitals could
reduce readmissions for all Medicare fee-for-service patients, not just
for groups of carefully selected patients. In this three-part series, I am
reviewing the evidence for that claim.
We saw in Part I and Part II that the research MedPAC cited in its 2007 report to Congress (the report Congress relied on in authorizing the HRRP) contained no studies supporting that claim. We saw that the few studies MedPAC relied on that claimed to examine a successful intervention studied interventions administered to carefully selected patient populations. These populations were severely limited by two methods: The patients had to be discharged with one of a handful of diagnoses (heart failure, for example); and the patients had to have characteristics that raised the probability the intervention would work (for example, patients had to agree to a home visit, not be admitted from a nursing home, and be able to consent to the intervention).
In this final installment, I review the research cited by the Yale New Haven Health Services Corporation (hereafter the “Yale group”) in their 2011 report to CMS in which they recommended that CMS apply readmission penalties to all Medicare patients regardless of diagnosis and regardless of the patient’s interest in or ability to respond to the intervention. MedPAC at least limited its recommendation (a) to patients discharged with one of seven conditions/procedures and (b) to patients readmitted with diagnoses “related to” the index admission. The Yale group threw even those modest restrictions out the window.
The Yale group recommended what they called a “hospital-wide (all-condition) readmission measure.” Under this measure, penalties would apply to all patients regardless of the condition for which they were admitted and regardless of whether the readmission was related to the index admission (with the exception of planned admissions). “Any readmission is eligible to be counted as an outcome except those that are considered planned,” they stated. (p. 10)  The National Quality Forum (NQF) adopted the Yale group’s recommendation almost verbatim shortly after the Yale group presented their recommendation to CMS.
In their 2007 report, MedPAC offered these examples of related and unrelated readmissions: “Admission for angina following discharge for PTCA [angioplasty]” would be an example of a related readmission, whereas “[a]dmission for appendectomy following discharge for pneumonia” would not. (p. 109) Congress also endorsed the “related” requirement (see Section 3025 of the Affordable Care Act, the section that authorized CMS to establish the HRRP). But the Yale group dispensed with the “related” requirement with an astonishing excuse: They said they just couldn’t find a way to measure “relatedness.” “[T]here is no reliable way to determine whether a readmission is related to the previous hospitalization …,” they declared. (p. 17) Rather than conclude their “hospital-wide” readmission measure was a bad idea, they plowed ahead on the basis of this rationalization: “Our guiding principle for defining the eligible population was that the measure should capture as many unplanned readmissions as possible across a maximum number of acute care hospitals.” (p. 17) Thus, to take one of MedPAC’s examples of an unrelated admission, the Yale group decided hospitals should be punished for an admission for an appendectomy within 30 days after discharge for pneumonia. 
Jeanette Brown had lost twenty pounds, and she was worried.
“I’m not trying,” she told me at her regular diabetes visit as I pored over her lab results. What I saw sent a chill down my spine:
A normal weight, diet controlled diabetic for many years, her glycosylated hemoglobin had jumped from 6.9 to 9.3 in three months while losing that much weight.
That is exactly what happened to my mother some years ago, before she was diagnosed with the pancreatic cancer that took her life in less than two years.
Jeanette had a normal physical exam and all her bloodwork except for the sugar numbers was fine. Her review of systems was quite unremarkable as well, maybe a little fatigue.
“When people lose this much weight without trying, we usually do tests to rule out cancer, even if there’s no specific symptom to suggest that,” I explained. “In your case, being a former smoker, we need to check your lungs with a CT scan, and because of your Hepatitis C, even though your liver ultrasounds have been normal, we need a CT of your abdomen.”
The message comes in over the office slack line at 1:05 pm. There are four patients in rooms, one new, 3 patients in the waiting room. Really, not an ideal time to deal with this particular message.
“Kathy the home care nurse for Mrs. C called and said her weight yesterday was 185, today it is 194, she has +4 pitting edema, heart rate 120, BP 140/70 standing, 120/64 sitting”
I know Mrs. C well. She has severe COPD from smoking for 45 of the last 55 years. Every breath looks like an effort because it is. The worst part of it all is that Mrs. C just returned home from the hospital just days ago.
On the morning of December 21, I opened my copy of the New York Times to find an op-ed that said almost exactly what I had said in a two-part article The Health Care Blog posted two weeks earlier. The op-ed criticized the Hospital Readmissions Reduction Program (HRRP), one of dozens of “value-based payment” programs imposed on the Medicare fee-for-service program by the Affordable Care Act. The HRRP punishes hospitals if their rate of readmissions within 30 days following discharge exceeds the national average. The subtitle of the op-ed was, “A well-intentioned program created by the Affordable Care Act may have led to patient deaths.”
The first half of the op-ed made three points: (1) The HRRP appears to have reduced readmissions by raising the rate of observation stays and visits to emergency rooms; (2) the penalties imposed by the Centers for Medicare and Medicaid Services (CMS) for “excessive readmissions” have fallen disproportionately on “safety net hospitals with limited resources”; and (3) “there is growing evidence that … death rates may be rising.”
That’s exactly what I said in articles published here on December 6 and December 7. In Part I, I described the cavalier manner in which the Medicare Payment Advisory Committee (MedPAC) endorsed the HRRP in its June 2007 report to Congress. In Part II, I criticized the methodology MedPAC used to defend the HRRP in its June 2018 report to Congress, and I compared that report to an excellent study of the HRRP published in JAMA Cardiology by Ankur Gupta et al. which suggested the HRRP is raising mortality rates. In its June 2018 report, MedPAC had claimed the HRRP has reduced the rate at which patients targeted by the HRRP were readmitted within 30 days after discharge without increasing mortality. Gupta et al., on the other hand, found that for one group of targeted patients – those with congestive heart failure (CHF) – mortality went up as 30-day readmissions went down.
The Hospital Readmissions Reduction Program (HRRP), one of numerous pay-for-performance (P4P) schemes authorized by the Affordable Care Act, was sprung on the Medicare fee-for-service population on October 1, 2012 without being pre-tested and with no other evidence indicating what it is hospitals are supposed to do to reduce readmissions. Research on the impact of the HRRP conducted since 2012 is limited even at this late date , but the research suggests the HRRP has harmed patients, especially those with congestive heart failure (CHF) (CHF, heart attack, and pneumonia were the first three conditions covered by the HRRP). The Medicare Payment Advisory Commission (MedPAC) disagrees. MedPAC would have us believe the HRRP has done what MedPAC hoped it would do when they recommended it in their June 2007 report to Congress (see discussion of that report in Part I of this two-part series). In Chapter 1 of their June 2018 report to Congress, MedPAC claimed the HRRP has reduced 30-day readmissions of targeted patients without raising the mortality rate.
MedPAC is almost certainly wrong about that. What is indisputable is that MedPAC’s defense of the HRRP in that report was inexcusably sloppy and, therefore, not credible. To illustrate what is wrong with the MedPAC study, I will compare it with an excellent study published by Ankur Gupta et al. in JAMA Cardiology in November 2017. Like MedPAC, Gupta et al. reported that 30-day CHF readmission rates dropped after the HRRP went into effect. Unlike MedPAC, Gupta et al. reported an increase in mortality rates among CHF patients. 
We will see that the study by Gupta et al. is more credible than MedPAC’s for several reasons, the most important of which are: (1) Gupta et al. separated in-patient from post-discharge mortality, while MedPAC collapsed those two measures into one, thus disguising any increase in mortality during the 30 days after discharge; (2) Gupta et al.’s method of controlling for differences in patient health was superior to MedPAC’s because they used medical records data plus claims data, while MedPAC used only claims data.
I will discuss as well research demonstrating that readmission rates have not fallen when the increase in observation stays and readmissions following observations stays are taken into account, and that some hospitals are more willing to substitute observation stays for admissions than others and thereby escape the HRRP penalties.
All this research taken together indicates the HRRP has given CHF patients the worst of all worlds: No reduction in readmissions but an increase in mortality, and possibly higher out-of-pocket costs for those who should have been admitted but were assigned to observation status instead.
But ACOs could pave the way for more significant cost-cutting based on competition.
By KEN TERRY
The Medicare Shared Savings Program (MSSP), it was revealed recently, achieved a net savings of $314 million in 2017. Although laudable, this victory represents a rounding error on what Medicare spent in 2017 and is far less than the growth in Medicare spending for that year. It also follows two years of net losses for the MSSP, so it’s clearly way too soon for anyone to claim that the program is a success.
The same is true of accountable care organizations (ACOs). About a third of the 472 ACOs in the MSSP received a total of $780 million in shared savings from the Centers for Medicare and Medicaid Services (CMS) in 2017 out of the program’s gross savings of nearly $1.1 billion. The other MSSP ACOs received nothing, either because they didn’t save money or because their savings were insufficient to qualify them for bonuses. It is not known how many of the 838 ACOs that contracted with CMS and/or commercial insurers in 2016 cut health spending or by how much. What is known is that organizations that take financial risk have a greater incentive to cut costs than those that don’t. Less than one in five MSSP participants are doing so today, but half of all ACOs have at least one contract that includes downside risk.
As ACOS gain more experience and expand into financial risk, it is possible they will have a bigger impact. In fact, the ACOs that received MSSP bonuses in 2017 tended to be those that had participated in the program longer—an indication that experience does make a difference.
However, ACOs on their own will never be the silver bullet that finally kills out-of-control health spending. To begin with, 58 percent of ACOs are led by or include hospitals, which have no real incentive to cut payers’ costs. Even if some hospitals receive a share of savings from the MSSP and/or private insurers, that’s still a drop in the bucket compared to the amount of revenue they can generate by filling beds instead of emptying them. So it’s not surprising that physician-led ACOs are usually more profitable than those helmed by hospitals.
Seema Verma, the Trump appointee who runs Medicare, has had an active week. The problem facing much-beloved Medicare is one that faces every other government-funded healthcare extravaganza: it’s always projected to be running out of money. Medicare makes up 15% of the total federal budget. That’s almost $600 billion dollars out of a total federal outlay of $4 Trillion dollars. The only problem here is that revenues are around $3.6 trillion. We are spending money we don’t have, and thus there there is constant pressure to reduce federal outlays.
This is a feat that appears to be legislatively impossible. The country barely is able to defund bridges to nowhere let alone try to reduce health care spending because, as everyone knows, any reduction in health care spending will spawn a death toll that would shame the black plague. The prior administration’s health policy wonk certified approach was to change the equation in health care from paying for volume to paying for value. This, we were assured, would allow us to get better healthcare for cheaper! And so we got MACRA, The Medicare Access and CHIP Reauthorization Act, that introduced penalties for doctors unable to provide ‘good’ care. Never mind that in some years good care means you treat everyone with a statin, and in others it means treat no one with a statin. When in Rome, live like the Romans. In 2018 parlance, that roughly translates to “check every box you can and everything will be all right.”Continue reading…
Earlier this month, the Centers for Medicare and Medicaid Services Administrator Seema Verma proposed bold changes to Medicare’s Accountable Care Organizations (ACOs), with the goal of accelerating America’s progress toward a value-based healthcare system—that is, one in which providers are paid for the quality and cost-effectiveness of care delivered, rather than volume delivered.
CMS has created a number of ACO programs over the last six years in an effort to improve care quality and reduce care costs across its Fee-for-Service Medicare population. In a Medicare ACO, hospital systems, physician practices and other voluntarily band together and assume responsibility for the quality and cost of care for beneficiaries assigned to them by Medicare. All ACOs meeting quality targets at the end of a given year receive a share of any savings generated relative to a predetermined cost benchmark; and depending on the type of ACO, some incur a financial penalty if they exceed the benchmark.
According to CMS’ recent analyses, ACOs that take on higher financial risk are more successful in improving quality and reducing costs over time. So one important objective of CMS’ proposed changes is to increase the rate at which ACOs assume financial risk for their beneficiaries’ care.
There is no meaningful difference between the performance of Medicare ACOs that accept only upside risk (the chance to make money) and ACOs that accept both up- and downside risk (the risk of losing money). But CMS’s administrator, Seema Verma, thinks otherwise. According to her, one-sided ACOs are raising Medicare’s costs while two-sided ACOs are saving “significant” amounts of money. She is so sure of this that she is altering the rules of the Medicare Shared Savings Program (MSSP). Currently only 18 percent of MSSP ACOs accept two-sided risk. That will change next year. According to a proposed rule CMS published on August 9, ACOs will have at most two years to participate in the MSSP exposed to upside risk only, and after that they must accept two-sided risk.
That same day, Verma published an essay on the Health Affairs blog in which she revealed, presumably unwittingly, how little evidence she has to support her decision. The data Verma published in that essay revealed that one-sided ACOs are raising Medicare’s costs by six-one-hundredths of a percent while two-sided ACOs are cutting Medicare’s costs by seven-tenths of a percent.  Because these figures do not consider the expenses ACOs incur, and because the algorithms CMS uses to assign patients to ACOs and to calculate ACO expenditure targets and actual performance are so complex, this microscopic difference is meaningless.
“Two beellion dawlers”
Even if the difference is not meaningless – even if two-sided ACOs actually save a few tenths of a percent for Medicare – the impact on Medicare spending will be barely noticeable. Verma assures us, without a hint of embarrassment, that her new rule will cut Medicare spending by $2.2 billion over ten years. “The projected impact of the proposal would be savings to Medicare of $2.2 billion over ten years,” she declares in her blog comment.
Dr. Evil from Austin Powers
I feel like we’re in a scene from the Austin Powers movie where Dr. Evil announces he will hold the world ransom for “one meellion dawlers.” Dr. Evil’s sidekick, Number Two, has to advise him that a million dollars is peanuts. Verma’s estimate of 2.2 “beellion dawlers” is essentially zero percent of the trillions of dollars CMS will spend on Medicare in the next decade.
The Administration proposal that would enable small employers to band together to purchase health insurance by forming Association Health Plans has several good features. Large companies do pay about 15% less, apples-to-apples, for health insurance than small businesses because they negotiate lower administrative fees, get larger discounts on health care prices and avoid premium taxes and risk charges by self-insuring. Allowing small business to replicate what boils down to volume discounts also appeals politically to many as a market-based alternative to government intervention. Reliance on Association Health Plans could result in substantial volume discounts, but, in the end, would be like paying $10 for a tube of toothpaste that retails for $100, a big discount and a rip-off price.
Even though the largest companies get very deep discounts, there is substantial research showing that their net costs are much higher than everywhere else because we in the United States pay higher prices for health care goods and services. One need to look no further than the benchmark large corporate purchasers who continue to pay about 40% or 50% more than Medicare for the same health care to see how excessive health care prices for private payers are. And this disparity is likely to get worse. While hospitals gobble up other hospitals and doctors’ practices and gain near monopoly market power to raise prices, employers of all sizes remain highly fragmented and, as a result, impotent price negotiators.
A better approach to health care cost containment than Association Health Plans hides in full view. Continue reading…