Medicare A reimbursement for inpatient hospitalization (the “two-midnight” rule) is based on the prospective payment system by diagnosis-related group (DRG), which incentivizes organizations to reduce costs per each service provided.(1) The Medicare episode-based advance alternative payment model (APM), known as the bundle payment system, provides predetermined payment for all services rendered during a specific care episode during the hospitalization and for the first 90 days after discharge, encouraging provider collaboration for effective and efficient treatment.(2) Medicare B payment during hospitalization pertains to patients hospitalized in observation status (the “one-night” rule), which necessitates provider–patient cost-sharing for each service received and each self-administered drug provided during the hospitalization, potentially exposing patients to higher expenses.(3 )Medicare B covers 80% of the Medicare-approved amount for an emergency department (ED) visit, with patients responsible for the remaining amount.(4) Medicare C reimbursement — capitation or Medicare Advantage — uses a per-member per-month or premium revenue model, transferring financial risk from the payer to the provider to incentivize lower utilization and prevention.(5) This article presents the post-discharge interventions of an innovative post-discharge clinic and the impact of those interventions on reimbursement and cost-saving for healthcare facilities and patients.
Methods
We established a post-discharge clinic (PDC) that incorporates transitional interventions without incurring significant expenses, utilizing leadership and networking with internal stakeholders. The transitional care interventions provided by the PDC and transitional programs were strategically designed, implemented, and iteratively evaluated, taking into account organizational objectives, assessment of inpatient care processes, readmission risk, inpatient and primary care service benchmarks, inpatient and outpatient scheduling processes, financial constraints, internal and external stakeholder input, and the diverse patient population seeking care at our institution. The PDC has expanded and operates efficiently through collaboration with multiple internal resources.
Patients in the general medicine units with a higher risk of readmission and inability to see their primary care provider (PCP) within seven days of discharge are prioritized for the PDC. Those with a lower risk of readmission are scheduled in the PDC within 14 days of discharge if they are unable to see their PCP within that time frame. Patients under the APM model and capitated patients are closely monitored to prevent rehospitalization and to coordinate care with their PCPs. Upon discharge from the hospital, patients receive a 48-hour transitional post-discharge call. During their PDC visit, patients receive comprehensive disease and medication education, medication reconciliation, opportunities to discuss adverse events, evaluation of their social support, and referral to other services.
We evaluated the financial impact of the PDC and its comprehensive transitional interventions on Medicare reimbursement based on reduction of readmission and ED return visits, and per-capita cost savings using organizational internal resources while improving reimbursement to the organization.
Results
Our evaluation assessed the operational costs, the cumulative reduction in readmission and ED return visits over the past three years, and the cost savings associated with the PDC interventions.
Quality
Our findings indicate that individuals who have received care at the PDC demonstrate lower readmission and ED return rates within the high-risk category compared with those who have not received care at the PDC.
Readmission and Emergency Return Visit Data
Data analysis revealed that patients from the hospitalist general medicine service (non-teaching services) with high risk of readmissions who were followed at the PDC have a readmission rate of 21%, compared with 40% for patients not followed at the PDC, representing a rate reduction of 48% for patients attending the PDC.(6) However, for high-risk patients followed on the general medicine service (the teaching services with the highest-complexity cases), the rate of readmission for patients followed at the PDC was 42%, compared with 36% for patients not followed at the PDC, indicating a rate increase of 17% for patients attending the PDC. The calculation of cost savings for inpatient care was based on the percentage of patients who did not return to the hospital after attending the PDC within 30 days of discharge, multiplied by the average length of stay and direct cost per patient day of hospitalization.
Patients with a high risk of readmission who are followed at the PDC from the hospitalist general medicine service have an ED return rate of 33%, compared with a rate of 52% of patients not followed at the PDC, representing a rate reduction of 34%. However, patients from the general medicine teaching service with high risk of readmission followed at the PDC have a return ED visit rate of 53%, compared to 48% for patients not followed at the PDC, indicating an increase rate of 10% for patients followed at the PDC. The estimation of cost savings in the emergency room was based on the percentage of patients who did not return to the ED after attending the PDC within 30 days of discharge, multiplied by the direct cost per patient ED visit.
There were no significant differences for moderate and low risk rates of readmission for readmissions and emergency return visits for those services, nor was there an impact on the length of stay. Medicare C patients were included in this calculation. Patients in observation status were excluded from this calculation.
Budgeting
We established collaborative networks and sought internal stakeholder support for this innovation, making use of internal resources without incurring additional internal costs for staffing or space — with the exception of a part-time nurse associate for clinical work and research. The post-discharge clinic was initiated without a budget but with 10% protected time from the hospitalist section, evolving to point-paid allocation for providers attending to patients at the PDC. Moreover, managerial support, nonprovider staffing, and space were provided by the Ambulatory Care Administration, with transitional care management calls facilitated by population health. The PDC achieves at least a break-even status through provider revenue and cost and provides institutional cost savings for every 10 patients as per the formula presented in the following section.
The estimated cost savings for every 10 patients are calculated as follows:
If the estimated number of patients avoiding readmission who participate in a transitional program within 30 days post-hospitalization is 10 patients:
The average length of stay/bed-days per high-risk patient is 7.5 days;
Total number of bed-days saved: 10 × 7.5 = 75;
Direct cost per patient day of hospitalization: $2,500; and
Estimated total cost-saving: 75 × 2500 = $187,500
Estimated number of patients who did not return to the ED who attended the PDC within 30 days post-hospitalization: 10 patients
Direct cost per patient ED visit: $1,500 (cost example); and
Estimated total cost-saving: 10 × 1500 = $15,000
Discussion
The Hospital Value-Based Purchasing Program (VBP)(7,8) incentivizes acute care hospitals to improve quality outcomes and cost efficiency through the use of total performance scores (TPS), which are based on clinical outcomes, person and community engagement, safety, and efficiency and cost reduction.(9) The effectiveness of transitional care is becoming increasingly critical for hospitals and value-based care organizations as a means of providing high-quality, safe, and cost-effective patient care to address the challenges associated with TPS.(10) Hospital readmissions can be financially burdensome and undesirable, with negative implications for both major payers and the public. Hospitals participating in the Inpatient Prospective Payment System and bundle-payer systems are publicly accountable for their costs and outcomes. Moreover, value-based care organizations that utilize risk-based payment systems are significantly impacted by high readmission rates, thus motivating them to invest in robust post-acute care initiatives.
High-risk patient populations and complex medical cases often are associated with increased readmission rates and poor outcomes, necessitating timely intervention to reduce the need for costly inpatient services.(10-11) However, even less medically complex patients can be affected by adverse events, such as medication errors and poor adherence to medical regimens, which can contribute to preventable readmissions. Communication breakdowns, information lapses, and unintended consequences often contribute to misperception and decrease shared decision-making by patients and families, medication nonadherence, decreased disease management, limited follow-up on test results or treatment plans, and missed post-discharge follow-up visits.(12-15) Addressing these factors can significantly reduce the likelihood of preventable readmissions or ED return visits while increasing post-hospitalization access to outpatient primary care.(16-18)
Our cost savings associated with Medicare A reimbursement were directly related to inpatient rehospitalization based on the prospective payment system by diagnosis-related group (DRG). The hospitalist general medicine services provide low- to high-complexity care for patients; the general medicine teaching services provide care for the highest-complexity general medicine cases. We identified a significant number of patients from the general medicine services who were out of network and without primary care providers. These patients required high-acuity care and were referred for transitional care interventions such as high-intensity surveillance, community coordination, and medication reconciliation. These referrals of potentially sicker patients to the PDC may have impacted our readmission rates. We cared for patients with advance APM reimbursement, but we were unable to follow them for 90 days, rendering our sample nonsignificant for calculations. Medicare C patients were included in the overall cost-saving calculations. Patients admitted under observation status were excluded from this calculation because Medicare B reimbursement was associated with these hospitalizations, and we were unable to access direct reimbursement calculations. Patients seen in the ED were reimbursed by Medicare B, and cost-saving calculations were noted as previously described.
Conclusion
The implementation of transformational and collaborative leadership, coupled with strategic financial management initiatives within budgetary constraints, necessitated innovative approaches to achieve competitive advantage and organizational objectives. Our methodology aimed to reduce readmissions and decrease ED return visits while maintaining cost-effectiveness, thereby impacting the organization’s Medicare A, B, and C reimbursement. On a broader scale, the PDC has the potential to influence the healthcare system’s Total Performance Scores’ quality domains, including clinical outcomes, efficiency and cost reduction, and person and community engagement.
Acknowledgment: We acknowledge the valuable support of the PDC providers and staff, Hospitalist Section, Ambulatory Care, Population Health, Data Analytics, Case Management, and Quality Leadership.
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