Medicare places hospitals in a discharge conundrum

A long time ago, in a bygone era, hospital discharges were simple. As a physician, you decided when to admit and discharge a patient from the hospital. Unfortunately, this process was often inefficient, costly, and subject to the whims of doctor and patient. Medicare, and other third-party payers, ultimately realized that this format made little sense and motivated keeping patients in the hospital too long. Many unethical doctors gamed the system by ordering questionable consults, insuring excessive lengths of stay, (LOS). As an attending physician, the longer the LOS, the more money they made for daily hospital visits.

Sadly, to some extent, this practice still exists today. In the early 1980’s, Medicare instituted its diagnostic related group, or DRG payment method, which capped hospital reimbursements by a given diagnosis, rather than upon a per diem basis. So the longer the patient stayed in the hospital, the more money the hospital lost. Conversely, the shorter the stay, the more money they reaped. Doctors, except for surgeons who did an operation, were excluded. Thus doctors and hospitals became entrenched on polar ends of the incentive equation.

This misalignment of financial incentives was a major factor in the birth and popularity of the new hospitalist specialty. Of inpatient Medicare claims for internists, the proportion handled by hospitalists jumped from about 9 percent in 1995 to about 37 percent in 2006. The percentage today is much higher. Often employed by the hospital, the latter now had the muscle to hurry the patient out of the inpatient setting, which increased the facility’s profits.

Alternatively a hospital group could be contracted for services by a hospital. If it’s LOS profile was less than satisfactory, the contract was not renewed or voided. But the hospitals faced another thorny issue. That was how to get the majority, if not all, of their inpatients admitted to the hospitalist service, and not that of a community physician. To mandate this would be in direct violation of many medical staff bylaws or rules and regulations. Some have done so by so-called “economic credentialing,” pressuring credentials and medical executive committees, to not renew admitting privileges of “over-utilizers.”

Others, like one local hospital, simply ignored the medical staff’s rules and regulations, and instituted a policy of all “unattached” emergency room patients needing to be admitted by a hospitalist. Faced with declining hospital reimbursements for visits, many family doctors quickly figured out they could make more money by seeing office patients and reluctantly, or gladly, relinquished admitting duties to the hospitalist. As a result, patient care has not always improved, and in others, actually suffered.

Studies found that although the hospitals saved money with hospitalists in charge, Medicare didn’t. Often hurried out of the hospital before stabilized, readmission rates began to climb. This “revolving door” consequence cost Medicare, and other insurers more, but increased the hospital’s profit. You see, even if a patient was discharged, and readmitted one day later, the meter would be reset and a new DRG payment to the hospital was initiated.

Perhaps slow and inept, Medicare is not completely dumb. On October 1, 2012, they started to financially penalize hospitals for excessive readmissions. The penalties involved are not small. If the readmission rates go above a certain percentage, the fine can be in millions of dollars. And the readmissions are for anything and anywhere. So if a patient in Miami is discharged from a hospital with congestive heart failure, and then is admitted in Michigan within 30 days of discharge with pneumonia, the Miami hospital is dinged. The actual rules of Medicare’s Hospital Readmission Reduction Program, which was birthed as part of ACA or Obamacare, are too complex to detail in this blog.

However, suffice it to say that now the “shove them out the door” policy perfected by hospitalists may backfire, and cost the institution more money than it saves. This schizophrenia of hospital discharging gets even more complicated when you consider that realistic fears of litigation drive many ER physicians to err on the side of admitting, rather than discharging patients. In answer to this, some hospitals are now experimenting with utilizing hospitalists in the emergency room.

This has left a muddy picture for patients, and their families, caught in the middle of what is in essence more of a monetary, than quality of care, battle.  Ultra-short, or long, hospital stays are often not in a patient’s best interest. Sadly, we may have replaced a costly and at times inefficient system, with one driven purely by the best reimbursement profile of the day.

Ideally, it would be great if third party payers supported and preferentially directed its patients to centers of excellence, where patient discharges are neither too early not late, and can prove good clinical outcomes.  How to measure and evaluate this will not be easy, but it is certainly not impossible with today’s metrics and wealth of health outcome data.

David Mokotoff is a cardiologist who blogs at Cardio Author Doc.  He is the author of The Moose’s Children: A Memoir of Betrayal, Death, and Survival.

View 3 Comments >

Most Popular

Get KevinMD's 5 most popular stories.