By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
    Health
    Healthcare organizations are operating on slimmer profit margins than ever. One report in August showed that they are even lower than the beginning of the…
    Show More
    Top News
    learn to recognize and treat yeast infections
    Most Commonly Asked Questions About Yeast Infections
    November 17, 2021
    Advanced lung cancer diagnosis systems used by doctors
    Advanced Lung Cancer Diagnosis Systems Used by Doctors
    March 6, 2022
    The Top Benefits of a Wearable Blood Pressure Monitor Watch
    The Top Benefits of a Wearable Blood Pressure Monitor Watch
    June 13, 2022
    Latest News
    7 Most Common Healthcare Accreditation Programs: Which Should You Use?
    August 20, 2025
    Hospital Pest Control and the Fight Against Superbugs
    August 20, 2025
    Hygiene Beyond The Clinic: Attention To Overlooked Non-Clinical Spaces
    August 13, 2025
    5 Steps to a Promising Career as a Healthcare Administrator
    August 3, 2025
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
    Policy and Law
    Get the latest updates about Insurance policies and Laws in the Healthcare industry for different geographical locations.
    Show More
    Top News
    Life Expectancies and Lethal Injections
    May 6, 2015
    The Future of Healthcare and Big Pharma is in Big Data Analytics
    February 5, 2021
    Financial Assistance for Clinical Trials
    September 16, 2015
    Latest News
    How Social Security Disability Shapes Access to Care and Everyday Health
    August 22, 2025
    How a DUI Lawyer Can Help When Your Future Health Feels Uncertain
    August 22, 2025
    How One Fall Can Lead to a Long Road of Medical Complications
    August 22, 2025
    How IT and Marketing Teams Can Collaborate to Protect Patient Trust
    July 17, 2025
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: Penalizing Hospitals for Readmissions: Will It Work?
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > Business > Hospital Administration > Penalizing Hospitals for Readmissions: Will It Work?
BusinessHospital Administration

Penalizing Hospitals for Readmissions: Will It Work?

Brad Wright
Brad Wright
Share
5 Min Read
SHARE

With notably few exceptions, the American health care system has been financed on the basis of volume rather than value. That means that we’ve been paying providers for everything that they do, rather than paying them for the outcomes they produce. This is not common in other fields. For example, if you are in an accident and have to take your car to a body shop, you (or your insurance company) typically pay them for the work once. If they haven’t repaired the vehicle properly, you can typically return the car to them and they will “make it right” for no additional charge.

With notably few exceptions, the American health care system has been financed on the basis of volume rather than value. That means that we’ve been paying providers for everything that they do, rather than paying them for the outcomes they produce. This is not common in other fields. For example, if you are in an accident and have to take your car to a body shop, you (or your insurance company) typically pay them for the work once. If they haven’t repaired the vehicle properly, you can typically return the car to them and they will “make it right” for no additional charge. If you go out to eat, and the meal is not to your liking, the restaurant’s manager will typically offer to make you something else at no additional charge, or will discount the price of your unsatisfactory meal.

In health care, you pay the doctor to treat you, and if the treatment fails, you pay them to treat you again, and again, and again. Now, I’m not suggesting that this alone prompts physicians to do their job poorly or to provide more care than is necessary. Rather, I’m suggesting that the financial incentives are such that they do not reinforce physicians’ efforts to provide high quality care. Efforts to work around this include managed care and capitated payments, with the thinking that this shifts risk onto the providers and encourages them to doggedly pursue better outcomes. In some cases, this has worked. In other cases, it has backfired, as physicians simply reduce the amount of care they provide, much of it arguably needed care.

The latest development in this area is the implementation of financial penalties for hospitals with excessively high readmission rates among Medicare patients. As of October 2012, if a hospital’s readmission rate exceeds their expected readmission rate, they are fined by the Centers for Medicare & Medicaid Services (CMS). Right now, the maximum penalty is a 1% reduction in total Medicare payments over the coming year. By 2015, the penalty will increase to a maximum of 3%. This is a lot more money than it might seem from the percentage figures. In fact, it’s estimated to save Medicare roughly $300 million this year. That means, if hospitals don’t improve, CMS might keep nearly $1 billion a year starting in 2015.

More Read

ALS TDI -The First Non Profit Biotech, A Hidden Investment Opportunity?
Giving Thanks for Connections to a Healthy Future
The Technology Corner: 3 Companies That Could Eradicate Ebola Virus
Hospice Fraud on the Rise
Top Digital Health Innovations That Will Transform Healthcare

Of course, the goal is to save even more money by using the penalty to encourage hospitals to prevent as many readmissions as possible. Medicare currently spends about $17 billion a year on readmissions, so there is considerable room for improvement and savings. However, I’m doubtful that the new penalties will achieve their desired effect. The reason is that hospitals have ways of artificially reducing their readmission rates. One prominent example is through the use of observation care, where patients are held in the hospital–sometimes for days–as outpatients. This is more costly for patients, who are responsible for a greater portion of their outpatient bills, it raises questions about the quality of care provided while a patient is under observation, and it seems like an ideal way for hospitals not to lose up to 3% of their Medicare reimbursement going forward. So, will penalizing hospitals for readmissions work? I doubt it. Not unless we find a way to prevent hospitals from working around the penalty.

TAGGED:hospital readmissions
Share This Article
Facebook Copy Link Print
Share

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

engineer fitting prosthetic arm
How Social Security Disability Shapes Access to Care and Everyday Health
Health care
August 20, 2025
a woman explaining the document
How a DUI Lawyer Can Help When Your Future Health Feels Uncertain
Public Health
August 20, 2025
physiotherapist at work
How One Fall Can Lead to a Long Road of Medical Complications
Health care
August 20, 2025
Common Healthcare Accreditation Programs
7 Most Common Healthcare Accreditation Programs: Which Should You Use?
Health News
August 20, 2025

You Might also Like

Microsoft Innovation Awards 2011

March 11, 2011

The Cost of Diagnosis: The Sometimes Fatal “Incidentaloma”

January 26, 2013

GlobalMed Introduces Teleaudiology Station

April 6, 2012
Image
BusinessGlobal HealthcarePublic Health

4 Reasons Substance Abuse is Driving up Healthcare Costs in 2017

April 13, 2017
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?