How Bundled Payments Ratchet Readmission Rates Downward

Care coordination and bundled payments are cost-lowering drivers. "It's not savings to the hospital," says one executive. "It's avoided medical cost."

This article first appeared in the June 2016 issue of HealthLeaders magazine.

With prodding from federal officials and an industrywide shift toward delivering services based on value rather than volume, healthcare providers are making progress on reducing hospital readmission rates, federal statistics show.

From 2007 to 2011, the all-cause 30-day hospital readmission rate for Medicare fee-for-service beneficiaries held steady at about 19% to 19.5%, according to the Centers for Medicare & Medicaid Services. But those rates fell to 18.5% in 2012 and 17.5% in 2013, CMS reports.

"We've seen amazing results already," says Brian Holzer, MD, MBA, senior vice president for home and community services at Pittsburgh-based Allegheny Health Network, which has expanded postacute care services and partnerships dramatically over the past two years. In 2014, AHN—an integrated system that reports $2.4 billion in revenue and 82,000 annual discharges—purchased four companies to establish a full suite of home health services: nursing, home medical equipment, home infusion, and hospice. Compared to 2014, AHN posted a 5% decrease in all-cause hospital readmissions last year in the health system's home-health service line, mainly on the strength of its home-health business unit, Healthcare @ Home, and improved care coordination with skilled nursing facilities, he says. The estimated cost avoidance resulting from the lower readmissions rate among AHN's home-health patients last year is $4.5 million.

While cost avoidance for patients and payers is a step forward in value-based medicine, financial incentives aligned with the new care models that drive down hospital readmissions are needed to expand and sustain value-based delivery of services, he says. "This isn't savings to the hospital. This is avoided medical cost. Until we align the financial incentives, you can understand the complexity of a health system going all-in when they are not really all-in. We are doing the right thing for the world that we believe we will be in shortly."

For the fiscal year ending in December 2014, AHN reported an operating loss of $37 million, but the setback was a $365 million improvement over the previous year's bottom line. Highmark Health, AHN's corporate parent, posted total revenue for 2014 at $16.8 billion.

Since 2012, CMS has launched several initiatives that are targeted in full or in part at hospital readmission rates, including payment penalties for a handful of conditions such as heart failure and pneumonia in the Hospital Readmissions Reduction Program, the Partnerships for Patients care transitions program, and public reporting of readmission rates on Hospital Compare.

The HRRP penalties have spurred change, says Jeffrey Brenner, MD, executive director of the Camden Coalition of Healthcare Providers, a nonprofit organization working to improve population health and develop value-based care models in one of the most economically disadvantaged communities in New Jersey. "This is the most exciting moment of my career. Partly because of readmissions penalties, people are having discussions they have never had before," he says.

For the federal fiscal year ending this September, CMS estimates the total payment penalty for hospitals with high readmissions rates will be $420 million.

"When everything is said and done, the whole health system is going to look different," Brenner says of initiatives such as HRRP that are accelerating efforts among healthcare providers to build more seamless care continuums, improve care coordination, establish community partnerships, and engage patients to set and achieve their health goals.

Efforts to reduce avoidable hospital readmissions reflect the kinds of fundamental changes that are beginning to take hold in the healthcare industry, Brenner says, noting most care coordination models have nurses and social workers playing the role of quarterback for patients rather than doctors. "We're at step one of 10 steps; and by the time you get to step 10, step one won't even be recognizable. Steps one and two are going to be painful: New roles for staff, new ways of getting paid, and less prestige for doctors."

Bundled payments drive change
In Madison, Wisconsin, UnityPoint Health Meriter Hospital is using bundled payments for hip and knee procedures as a springboard to quicken the organization's adoption of value-based care and to reach beyond the hospital walls to establish better relationships with patients and community partners.

Meriter, a member of Iowa-based UnityPoint Health and 448-bed community hospital, started performing knee replacement procedures under bundled payments in 2012 and contracted with CMS to perform hip procedures through the agency's Bundled Payments for Care Improvement program in 2014.

For the fiscal year ending December 2014, UnityPoint Health posted net revenues at $557 million. Meriter was UnityPoint Health's strongest subsidiary in 2014, posting net revenue at $405 million.

Readmissions reduction is one of the primary goals in Meriter's approach to bundled payments, says Philip Swain, director of orthopedics and rehabilitation at the hospital. "Our bundled payment program would fail if we had high readmission rates. Our bundled payment program would fail if we had postacute care usage too high. Our readmission rates are down 60% since before we started bundles," he says of the drop in joint replacement procedure readmissions from 2012 to last year. "It's had a halo effect over all of our joint-replacement patients. The commercial payers have also seen [that we are achieving] reductions in readmissions."

Meriter's bundled payments model has key elements inside and outside the hospital.

At the hospital, care navigators play a crucial role for patients in the bundled payment program, Swain says. "They hold the hand of the patient all the way through the care continuum. They look proactively at risk factors. They start mitigating those risks before the patient even goes into surgery."

The care navigators are part of the patient discharge process and stay in touch with patients through phone calls after they leave the hospital. "They make sure the patient's medication is managed properly. They eliminate as many pitfalls as possible," he says.

Care navigators serve as an essential point of contact for patients before, during, and 90 days after a hip or knee replacement procedure, says Pamela Dahlke, RN, BSN, MBA, Meriter's director of care coordination. "We follow those patients through a more extended period of time."

Care navigators play a pivotal role in the postacute care setting, she says. "High success comes with connecting patients with providers who they can get to."

When care navigators began reaching out to community partners, Dahlke says local skilled nursing facilities were "skeptical at first," chafing in particular over the drive in bundled payment contracting to shorten length of stay at hospitals and postacute care facilities. "In this journey, we are all in it together; but when you talk about length of stay, it's a difficult conversation to have."

Meriter has established informal relationships with several SNFs and is working on creating formal partnerships in the near future, Swain says.

"Our approach is twofold. Our first priority was just to get out to our nursing homes and meet with them," he says, noting many local SNFs had never worked with bundled payments, which require lower lengths of stay, higher-quality care, and reduced readmission rates to be successful. "Our second goal is to develop more formalized relationships with skilled nursing facilities. We can't steer patients—they have choice. But you can share objective quality information with patients that can help them with their decision making. … Any relationship we make with a nursing home has to be a two-way street. We ask what we can do to help reduce length of stay. We ask how we can work together to meet goals."

A robust home-health capability also is an important component of Meriter's model for bundled payments. Home health nurses are the frontline staff members for the hospital's care transition program, which features home visits and an average of five check-in phone calls in the 30 days following hospital discharge, says Mandy McGowan, clinical manager at UnityPoint Health-Meriter in the home health unit in Madison. "We can help get patients out of the hospital and prevent readmissions. Keeping the care at home—safely—will drastically reduce cost of care to the system."

Meriter's integrated electronic medical record system includes home health nurses, which boosts care coordination and eases the hospital discharge transition, McGowan says. "The discharge goes much smoother. We have what we need. We work with discharge planners in the hospital. They speak with us several times per day."

The communication between hospital staff and home health nurses is a key to postacute care success when treating high-risk patients, she says. "We have built up the comfort level of discharge planners so they can talk with patients about postacute care options. All discharge planners spend at least one day training with home health."

Meriter's care transitions program involves an intense level of patient engagement, McGowan says. The home health staff calls patients in their hospital rooms the day of the discharge to outline the discharge process. Depending on the risk level for complications, home health nurses visit or call patients at home on the day after discharge to review care plans, check medications, urge follow-up visits with healthcare providers, and make sure patients are prepared to recover at home.

"We talk with them about their diagnosis and what happened during their acute episode. We ask them what they were feeling the day when they needed to go to the hospital, so they don't panic if that takes place again. They have a plan in place."

After the day of discharge, patients in the care transitions program receive a phone call three days later, then weekly for 30 days.

In terms of bottom-line calculations of cost and revenue, Meriter's home care transitions program is having a neutral financial impact on the organization, but the effort is clearly helping to avoid unnecessary medical spending, McGowan says. "We can avoid observation readmissions to the hospital. There are things we can do outside of the hospital at follow-up that can help keep patients at home rather than in a skilled nursing facility, which is a tremendous financial benefit to patients."

Demolishing silos and investing resources
Healthcare providers have developed several strategies to reduce hospital readmission rates, but integrating these new strategies across organizations and demolishing the walls that have divided sectors of the healthcare industry for decades remain huge challenges, says Mary Naylor, PhD, RN, a professor at the University of Pennsylvania School of Nursing.

"Transitional care will be effective if it is well-integrated into a whole delivery system. It has to be connected. It can't be outside. What we absolutely don't want is someone leaving the hospital and no one follows up with them. We need to make the journey for patients much more seamless. Transitional care shouldn't be a standalone. It should be a standard way of delivering value for all high-risk populations."

The transitional care model Naylor helped develop at UPenn features advanced practice nurses serving in the role of care-coordination quarterback. In California, Irvine-based Global Transitional Care began serving patients in July 2015 through Medicare to provide transitional care services using the UPenn model. As of April of this year, GTC had provided such services to 250 patients without a single avoidable hospital readmission, CEO Rani Khetarpal says, noting five GTC patients had experienced unavoidable hospital readmissions.

GTC is gathering 450 fields of data on each patient to determine the primary drivers of hospital readmissions, she says. "We are trying to determine why these patients go back to the hospital. So far, what we have seen is that there is no one answer to that question. It's a much more complex outcome than just preventing the readmission. There's just simply a lack of resources for most of these patients. Even with Medicare reimbursement, the patients who are being readmitted are the patients who can't get back to the doctor in seven to 10 days for their follow-up appointments."

As more resources are applied to building seamless continuums of care, more success in readmissions reductions and other value-based propositions should be expected, Khetarpal says. "We're not the only solution. We can't take every patient. But this is the norm now, not the exception."