NY Times: Medicare Flexes Financial Muscle to Prevent Hospital Readmissions

Last month, Medicare began issuing penalties to hospitals with what it believed had “one too many readmissions,” writes the New York Times in an article this week.

The article discloses Medicare addressed 2,217 hospitals, with 307 of those receiving the maximum punishment of a 1% reduction in the program’s regular payments for every patient over the next year.

The crackdown on readmissions derives from the effort to eliminate unnecessary Medicare spending, which the Congressional Budget Office noted reached $556 billion this year. The penalties are believed to garner $300 million this year, but the goal, according to the article, is to pressure hospitals in paying closer attention to patients after discharge to minimize chances of readmission. 


The New York Times reports:

“With nearly one in five Medicare patients returning to the hospital within a month—about two million people a year—readmissions cost the government more than $17 billion annually. 

Hospitals’ traditional reluctance to tackle readmissions is rooted in Medicare’s payment system. Medicare generally pays hospitals a set fee for a patient’s stay, so the shorter the visit, the more revenue a hospital can keep. Hospitals also get paid when patients return. Until the new penalties kicked in, hospitals had no incentive to make sure patients didn’t wind up coming back.


The maximum penalty is set to double next October and then reach 3 percent of reimbursements in October 2015. Medicare also is expanding the list of conditions it will assess in setting punishments. 

With pressure to avert readmissions rising, some hospitals have been suspected of sending patients home within 24 hours, so  they can bill for the services but not have the stay counted as an admission.”  

Read the full article here.

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Written by Jason Oliva