# 3 Readmissions to Reduce Now

Neal Gold, MD, Director, Sg2, for HealthLeaders Media , March 15, 2011

To determine the potential penalty, the amount of excessive payments made for each of the 3 conditions must be calculated. The PPACA defines excessive payments as the product of the number of patients with the applicable condition, the base DRG payment made for those patients and the percentage of readmissions above the expected rate for that specific hospital.

Sample Hospital: (Number of patients with condition) x (Average reimbursement for condition) x (% Higher than expected) = Excessive payment for condition

 Condition # of Patients Avg Reimbursement % Higher Than Expected Excessive Payment CHF 500 \$5,000 20% \$500,000 AMI 400 \$4,000 10% \$160,000 Pneumonia 300 \$3,000 5% \$45,000 Total Excess Payment \$705,000

Click to view full table.

Continuing with the example from the worst-case scenario, if the above sample hospital’s total inpatient operating payments from Medicare were \$50 million in FY 2012, then their excessive payments were 1.4% of total operating payments (\$705,000 divided by \$50 million). However, the maximum penalty in FY 2013 is 1% of the total operating payments, which is less than this hospital’s total excessive payments. Based on this example, this hospital would lose \$500,000 (1% of \$50 million) of its inpatient operating payments in FY 2013. On the other hand, if excessive payments were determined to be 0.8% (instead of 1.4%), then the hospital would be penalized \$400,000 (0.8% of \$50 million).

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Chad E. Gay (7/15/2011 at 3:42 PM)
How is the percentage of readimissions above the expected rate for a specific hospital calculated?

Lisa Stansbury (3/15/2011 at 4:07 PM)
Reducing readmissions using health coaches is a low cost, low tech care coordination effort that has been a successful three-year effort sponsored by CMS. (We were a part of the project in Louisiana.) Free listening sessions for providers who want to learn more about how to do this are are being set up now by the Colorado Foundation for Medical Quality. You can also find free info at our Medicare QIO website or just DM me on twitter @eQHealth

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