Medicare 2016 Penalties See More Hospitals Dinged than in 2015

December 16th, 2015

As we recently reported, a study from the Agency for Healthcare Research and Quality (AHRQ) revealed that hospital-acquired condition (HAC) rates were flat between 2013 and 2014. So it doesn’t come as much surprise that a greater number of hospitals will receive a 1% cut in Medicare reimbursement in 2016 than in 2015: 758, up from 724.

To add insult to injury, about 54% of the current crop of penalized hospitals were also hit during the last round. All told, hospitals will lose a combined $364 million in reimbursements (children’s hospitals, critical access hospitals, and veterans hospitals are exempt).

The HAC Reduction Program has been the subject of much debate in the world of healthcare reform. Hospital administrators and physicians have called the HAC evaluations “flawed” and call for refinement, saying the program does not consider a hospital’s size or all of the different procedures performed. The program also does not adjust for economic factors – in other words, hospitals that may primarily serve lower-income populations that may be older, sicker, or have more comorbid conditions that could lead to adverse outcomes. The Centers for Medicare & Medicaid Services (CMS) is required to penalize a quarter of hospitals every year. And while hospitals may have reduced HAC rates, the improvements may not have been enough to avoid another ding from CMS.

But despite grumblings about the data, there is evidence that the penalties may be working: HACs have declined a total of 17% between 2010 and 2014l. While the reasons for the dip haven’t been studied, it does seem to have coincided with the beginning of the HAC Reduction Program and other CMS quality-based initiatives (including the possibility of bonuses).

So which is better – the carrot (bonuses) or the stick (penalties)? Only time – and more research – will tell.