How Medicare is Changing the Way We Pay for Health Care

Recently, the Providence Journal posted an article detailing the release of new Medicare data that highlighted the poor readmission rates for four Rhode Island hospitals (Rhode Island Hospital, Miriam Hospital, Kent Hospital, and Our Lady of Fatima Hospital). The data suggests that these hospitals see patients readmitted for medical attention at rates higher than the national average. The result is that millions of dollars are being wasted on subsequent health care that may be either preventable or unnecessary with improved coordination of care. Now, Medicare is changing how it reimburses hospitals for patient readmissions in an effort to reduce spending and, hopefully, improve patient care.

Why are readmission rates important? They serve as an indication of the quality of the health care being delivered to patients during initial hospitalizations. Readmission rates also reflect the continuity and coordination (or the lack) of care between hospitals and secondary medical providers, such as primary care doctors and physical therapy. As the ProJo article noted, patients are often discharged from a hospital without any coordination between their other doctors. Thus, patients often return to hospitals for non-emergency care or medical attention that could be better serviced by another provider, frequently at a lower cost.

The shift in Medicare’s reimbursement for patient readmissions signals an important and positive change for health care providers. It is creating a serious financial incentive for hospitals to provide better and higher-quality initial care, and also to coordinate foreseeable and necessary follow-up treatment among a patient’s other medical providers prior to discharge. The shift means that hospitals now have an economic incentive to avoid readmissions because Medicare won’t pay for them. Under Medicare’s previous reimbursement system (also called the fee-for-service system), there was no distinction in reimbursement rates for initial hospital care and care upon readmission – meaning that hospitals would make more money each time they subsequently treated a patient. The more readmissions that a patient required, the more money the hospital would make. Medicare is shifting to a quality of care system that is designed to avoid readmissions by not reimbursing hospitals for such care.

Medical malpractice law suits, like those handled by Decof, Decof and Barry, have the same effect. By forcing hospitals and doctors to be accountable to their patients for medical mistakes and preventable harm, the civil justice system creates economic incentives for better patient care.


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