751 Hospitals Slapped for HAI by Medicare

Healthcare is the #1 concern among voters this year according to a recent poll by Monmouth University.

So the news that a whopping 751 hospitals—including such brand name institutions as Denver Health Medical Center, Grady Memorial Hospital in Atlanta, The Mount Sinai Hospital in New York City, Northwestern Memorial Hospital in Chicago, Stanford Health Care hospitals in California and the University of California-San Francisco (UCSF) Medical Center—failed to meet Centers for Medicare and Medicare Services’ (CMS) goals for minimizing hospital-acquired infections (HAIs) is certain to add to voter’s concerns.

Oh, and CMS also issued its 2018 trustees report which said the Medicare Trust Fund is expected to run out of money sooner than expected.

What’s going on?

Penalties Assessed for Hospital Acquired Infections and Complications

On June 7, 2018 the Centers for Medicare and Medicaid Services announced penalties—a year’s worth of Medicare payments—to be assessed against 751 hospitals for failing to keep rates of hospital-acquired infections and other patient complications below target rates.

The penalty, which was created four years ago by the Affordable Care Act (ACA), is supposed to provide a financial incentive for hospitals to avoid infections and other patient complications.

In evaluating each hospital’s success or failure, Medicare considers rates of infections from colon surgeries, hysterectomies, urinary tract catheters and central line tubes inserted into veins. Medicare also examines rates of methicillin-resistant Staphylococcus aureus, or MRSA, and Clostridium difficile, known as C-diff. The frequency of 10 types of in-hospital injuries, including bedsores, hip fractures, blood clots, sepsis and post-surgical wound ruptures, are also assessed. All these types of potentially avoidable events are known as hospital-acquired conditions, or HACs.

Hospitals Being Punished for Treating Sicker Patients?

Academic teaching hospitals—many of whom are among the premier hospital systems in the world—were penalized more than non-teaching hospitals although the rate is down from last year’s levels.

According to a Kaiser Health News analysis, a third of all teaching hospitals were penalized. Last year the rate was around 50%.

Among this year’s penalized academic medical centers were Denver Health Medical Center, Grady Memorial Hospital in Atlanta, The Mount Sinai Hospital in New York City, Northwestern Memorial Hospital in Chicago, Stanford Health Care hospitals in California and the University of California-San Francisco (UCSF) Medical Center, according to federal records.

Stanford Health Care issued a statement regarding this perhaps counterintuitive pattern saying: “Academic medical centers serve patients with more-complex conditions who are at greater risk of hospital-acquired infections (HAIs) compared to community health care providers. Hospitals with a high rate of immunocompromised patients will always seem to have higher HAIs.”

Kaiser’s analysis also showed that hospitals that treat large proportions of low-income people were more likely to be fined than hospitals with an affluent patient base. About a third of all safety net hospitals were penalized.

According to Kaiser Health News, “Some repeatedly penalized hospitals, such as Northwestern Memorial Hospital in Chicago, say the program is flawed by what researchers call surveillance bias: The hospitals that are most diligent in testing and treating infections and injuries are going to appear to have more than comparatively lackadaisical institutions. The hospitals are responsible for reporting incidents to the federal government.”

“Medicare says it performs spot-checks, but Dr. Karl Bilimoria, director of the Surgical Outcomes and Quality Improvement Center at the Northwestern University Feinberg School of Medicine, said more policing is needed for the rates to be credible.”

“‘In no other industry would this pass, where a program without an audit and voluntary data reporting would be considered valid,” Bilimoria said. “We know guys are gaming.”

The other issue is that Congress directed CMS to penalize the worst-performing 25% of general hospitals each year—regardless of overall HAC improvement. That guarantees that more than 750 hospitals will have Medicare payments clawed back every year regardless of performance gains.

Medicare excluded certain hospitals from scrutiny. These were hospitals that treat psychiatric patients, veterans or children. Also exempted are hospitals with the “critical access” designation for being the only provider in an area.

Hard-Hit States

According to Kaiser Health News, “This year’s punishments landed the hardest in Connecticut and Delaware, where Medicare penalized half of the evaluated hospitals. In New York and Nevada, 4 in 10 hospitals were penalized. A third were punished in Rhode Island and Georgia. (These figures do not include specialty hospitals automatically exempted from penalties: those serving veterans, children and psychiatric patients, and ‘critical access’ hospitals that are the only institutions in their area.)”

“While every state except Maryland—which is excluded because it has a different Medicare payment system—had at least one hospital punished, some got off comparatively lightly. Sixteen percent of hospitals or fewer in Alabama, Kansas, Massachusetts, Missouri, Ohio, Texas and nine other states were punished.”

Good News and Bad News

Three hundred and thirty-six hospitals, by contrast, improved their numbers from last year and avoided the penalty in 2018. They include such major academic hospital centers as Barnes Jewish Hospital in St. Louis, Brigham and Women’s Hospital in Boston, Cedars-Sinai Medical Center in Los Angeles, the Cleveland Clinic, Geisinger Medical Center in Danville, Pennsylvania., Hospital of the University of Pennsylvania in Philadelphia, Intermountain Medical Center in Murray, Utah, and the University of Michigan Health System in Ann Arbor.

Four hundred twenty-five hospitals were repeat offenders.

All the penalized hospitals were informed that the pay reductions would apply retroactively to Medicare payments from the beginning of the federal fiscal year in October 2017 and through the end of September 2018. Medicare will cut by 1% its payments for each patient’s stay as well as the amount of money hospitals get to teach medical residents and to care for low-income people. The total amount for each hospital depends on how much they end up billing Medicare.

2018 Medicare Trustees Report

In other news, CMS issued its annual Trustees report and the headline is that the Trust will be broke by 2026—a couple years earlier than expected.

What happens to Medicare if the Trust is depleted? The shortfall is paid by current tax income or borrowing or both.

Wasn’t the Affordable Care Act supposed to enact a series of measures to lower healthcare costs and help Medicare stay solvent?

A Medicare Update

Fifty-five million Americans rely on Medicare for their health insurance. Most of these people are elderly, although not all. Medicare’s healthcare bill came to $710 billion in 2017.

Medicare is in the teeth of the Baby Boomer surge right now, so can the federal government pay for Medicare over the next 20 years of rising retirements?

The answer, according to the Trustee’s report, is yes but only if taxpayers are prepared to pay the freight once the Medicare Trust Fund is shut down.

Predicting Healthcare’s Future

The analysts who wrote the Trustee’s report predict that Medicare spending will rise to somewhere between 6.2-8.9% of the economy. Add in Social Security and retiree support will be the single largest federal expenditure.

The Trustee’s gave some scenarios and then urged Congress to pass legislation to ease the looming financial problem.

To help get Congress off its duff, the Trustees presented an alternative view of the future—which they termed the “more realistic ‘illustrative alternative.’”

As explained in the Trustee’s report, the illustrative alternative:

1. reduces provider payments by healthcare-specific rather than overall productivity
2. moves from current law to the Medicare economic index (MEI) to adjust physician payments
3. assumes physician bonuses will continue indefinitely after 2025

Notably, the report pointed out that 34% of Medicare beneficiaries are enrolled in Medicare Part C (aka Medicare Advantage), which is Medicare’s managed care alternative.

Paying Doctors

Recall that physicians who accept Medicare patients were faced with an annual reduction in pay under the sustainable growth rate (SGR) provision but that the SGR was annually deferred by Congress until, finally, the Medicare Access and CHIP Reauthorization Act of 2015 killed the SGR entirely.

That helped the doctors but eroded Medicare’s long-term solvency prospects.

The Trustee’s report goes on to say, “In particular, additional payments of $500 million per year for one group of physicians and 5-percent annual bonuses for another group are scheduled to expire in 2025, resulting in a significant onetime payment reduction for most physicians. In addition, the law specifies the physician payment update amounts for all years in the future, and these amounts do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases.”

The Trustee’s forecast did include doctor payment rate reductions, but those won’t happen.

Furthermore, the ACA did mandate that provider reimbursement rates be reduced according to a fairly complicated formula based on the growth in economy-wide private nonfarm business multifactor productivity.

But with the Trump’s administration’s determined attacks on the ACA, that’s also probably off the table.

So, CMS is angling for some new rules, or just let the chips fall where they may.