Hospitals face $1.6 billion in penalties, survey says

NEW YORK – As they work to curb readmission rates and shift toward value-based reimbursement, hospitals are being slapped with big penalties that experts say are only increasing. A recent study from CipherHealth shows a mounting $1.6 billion in HCAHPS and readmission penalties facing hospitals today.

The survey calculated that at more than five hundred hospitals nationwide, three-year at-risk amounts were $3,500 per inpatient bed, a number experts say could provide clarity and prioritizing strategies for the healthcare industry. 

Value-based purchasing and readmission penalties for hospitals seek to align incentives around patient care, tying the successful recovery of a patient and that patient’s perception of the quality of the hospital to Medicare and Medicaid reimbursements. With 39 percent of hospitals running at a loss in 2011, even a small change to these reimbursement rates can lead to huge changes in staffing models at hospitals and ultimately the quality of patient care they are able to provide.

The CipherHealth study analyzed how this legislation would affect acute care hospitals, specifically. Using data from the American Hospital Association, Kaiser Family Foundation and CipherVoice patient surveys, the report found some surprising results.

In states such as West Virginia, the statewide risk is quite low, ranking 32nd when compared to the rest of the nation on three-year at-risk totals for readmissions and HCAHPS. However, at $3,600, the average amount at risk per bed in West Virginia is among the highest state averages in the country.

“The risk per bed view is a much more effective way to look at the data. Thinking of penalties on a per-bed basis helps hospitals to prioritize the dozens of different pieces of legislation and focus on what will create the most value for their organization,” says Zachary Silverzweig, one of the founders of CipherHealth. “It’s why we we’re able to establish such a strong presence in West Virginia. We quickly realized there was a serious pain point and we were well-positioned to deliver a solution to help hospitals avoid these penalties.”

In some states, however, the story is almost the exact opposite. California ranks second in terms of total at risk amount, yet ranks 30th when viewed on a risk-per-bed basis. Texas ranks fifth at the aggregate level, but on a per-bed basis, it ranks 32nd. However, when looking at the data for California and Texas at the health system level, there is wide variation.

Tenet Healthcare, which has a presence in 11 states, has an amount at risk per bed of $2,203 overall, but for its Texas facilities, amount at risk per bed is $1,481. Other health systems such as East Texas Medical Center have a much higher amount at risk per bed at $4,370.

The analysis also offers insights that defy geographic and demographic trends: North Dakota has a 70 percent higher per-bed risk than South Dakota and Mississippi has 51 percent higher average per-bed risk than neighboring Alabama.

With hospital executives facing everything from RAC audits to value-based purchasing to meaningful use to ICD-10, it is critical to be able to prioritize the various hospital initiatives and focus on key projects that can drive both short and long-term ROI, the study's authors note.