Report: Social Risk Factors Should be Considered When Hospitals Penalized for Readmission Rates

New research conducted in part by a leader at Detroit’s Henry Ford Health System shows that U.S. safety net hospitals, or those obligated to provide health care to all regardless of ability to pay, would benefit from a new model that accounts for social risk factors in determining how the federal government financially penalizes health care organizations for readmission rates.
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David Nerenz
David Nerenz of Henry Ford Health System worked on research that shows penalization for hospital readmission should take into account patients’ social risk factors. // Photo courtesy of Henry Ford Health System

New research conducted in part by a leader at Detroit’s Henry Ford Health System shows that U.S. safety net hospitals, or those obligated to provide health care to all regardless of ability to pay, would benefit from a new model that accounts for social risk factors in determining how the federal government financially penalizes health care organizations for readmission rates.

David Nerenz is the director emeritus of the Center for Policy and Health Services Research at Henry Ford, and the study’s senior author.

“Our study shows how accounting for social risk can have a significant positive financial impact on safety net hospitals,” he says. “And we can do so without compromising quality of care.”

Researchers say their risk adjustment model could reduce the financial penalty for at least half of all of these hospitals and, in some cases, render them from any penalty. Social risk factors include poverty and living in disadvantaged neighborhoods.

More affluent hospitals that care for higher-income, better-educated patients, could see their penalty for readmission rates increase with the new model.

The study was published online in Health Services Research and is expected to be in print in April. It is expected to add to the debate of the equity of Medicare’s Hospital Readmissions Reduction Program (HRRP). The program is administered by the Centers for Medicare and Medicaid Services and creates financial incentives for hospitals for lowering their readmission rates by penalizing those with higher rates.

Safety net hospitals have long said they are unfairly penalized under the current model because it doesn’t account for social risk factors that put their patients at risk of readmission.

For the study, researchers analyzed claims data from nearly 3 million fee-for-service Medicare patients hospitalized for heart attack, congestive heart failure, or pneumonia from December 2012-November 2015. Through their approach, they hoped to incorporate a broader group of social risk factors than previous research, compare hospital performance on readmissions with and without adjustment for social risk factors, and calculate the financial impact of penalties levied against hospitals after adjusting for the social risk factors.

Results showed that social risk factors such as poverty, disability, and living in a disadvantaged neighborhood were linked with higher readmissions in all three medical conditions. When adjusted for social risk factors, however, the readmission rates for safety net hospitals dropped significantly for the three conditions compared to their affluent counterpart hospitals.

The changes translated to a major shift in assessed penalties. Safety net hospitals saw a 21.8-percent reduction in penalties, or about $17 million, after the adjustment, while affluent hospitals saw a 22-percent increase in penalties, or about $15 million.

“Failing to account for differences in the social complexity of patients hospitals care for has stripped significant resources away from our safety net,” says Mat Reidhead, vice president of research and analytics at the Missouri Hospital Association and a co-author of the study. “These are resources that could have been directed toward clinical quality improvement or upstream community health interventions. And while the recent intercession of Congress is certainly a step in the right direction, our findings suggest more can be done to ensure equity in the readmissions reduction program.”

HRPP was implemented in 2012 and has fueled the debate since. The findings of this most recent study are the first to demonstrate the feasibility and impact of adjusting for social factors and financial penalties for HRPP readmissions.

A 2016 study found little meaningful change in readmission rates when studied in conjunction with patient income but did not assess the financial impact of the adjustment. Under the 21st Century Cures Act, Congress requires each hospital to be assigned to one of five peer groups based on patients’ Medicaid status in assessing penalties under HRPP.

“HRPP penalties cost safety net hospitals millions of dollars each year but aren’t a fair reflection of their performance,” says Dr. Karen Joynt Maddox, the study’s lead author and assistant professor of medicine in the cardiovascular division at Washington University’s School of Medicine in Missouri. “Adding social risk factors to risk adjustment would be a significant step towards a more equitable program.”

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