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Obamacare punishes hospitals that see poor patients, study finds


An Obamacare program that aims to improve American health care may have an unintended side effect: penalizing hospitals that serve the sickest and poorest patients.

The Affordable Care Act penalizes hospitals that have high readmission rates, where patients come back within 30 days. The aim of that program was to encourage doctors to do the best job possible on the first hospital visit, improving patients' experience and saving money by preventing a second trip.

But a new paper from three Harvard health-care experts suggests that the readmission program is penalizing hospitals for the type of patients they see. Hospitals that have high readmission rates tend to see patients who are less educated, more disabled, and more likely to suffer from depression — factors the Obamacare program doesn't account for.

All told, the new Harvard study estimates that about half of the difference in readmission rates can be explained away by patient population characteristics. And that means some of the hospitals could be getting penalized more simply for seeing vulnerable populations.

"The clear implication is this penalty exacerbates the financial strain they're under," says J. Michael McWilliams, an associate professor at Harvard Medical School. "One would worry this would translate into worse-quality care."

The White House says the Obamacare program is working — but health experts have grown skeptical

Obamacare's readmission penalty has only grown more powerful since it began in 2013. Back then, the stakes were lower: The federal government dinged the worst-performing hospitals 1 percent of their Medicare revenue.

Each year the penalties have gotten bigger, and this year hospitals with the highest readmission rates could lose as much as 3 percent of their Medicare revenue. Hospitals are expected pay more than $400 million in penalties this year.

The White House has often touted the readmission program as a notable success of the Affordable Care Act, noting that repeat trips to the hospital have dropped significantly since it took effect.

(Council of Economic Advisors)

The readmission penalty does control for some factors outside the hospital's control, like age, gender, and a few preexisting conditions. Still, a few years ago academics started raising concerns that the readmission penalty did not control for enough of those factors. They worried that it would end up penalizing hospitals that served low-income patients — people who, because they have weaker social support systems, might be more likely to return to the hospital even if they received the very best care.

Harvard's Karen Joynt and Ashish Jha published data in 2013 showing that hospitals facing no penalties were the most likely to serve few low-income patients.

(New England Journal of Medicine)

The readmissions program has the "potential to exacerbate disparities in care and create disincentives to providing care for patients who are particularly ill," they wrote in an accompanying New England Journal of Medicine op-ed.

The finding: Obamacare penalizes hospitals for seeing sick patients

In this new paper, Harvard's Michael Barnett, John Hsu, and Michael McWilliams explored what would happen if the federal government controlled for even more ways that patients could differ.

In addition to the factors Medicare already controlled for — age, gender, a few health-care factors — they added in 29 other factors. This included things like patients' education level, whether they smoked, if they were working, and if they suffered from depression. This is data available on a subset of Medicare patients who filled out a lengthy survey, but not all of the program's 49 million enrollees.

They found that hospitals that had the highest readmission rates tended to see different types of patients. At the quarter of hospitals that did the worst, 30 percent of patients had less than a high school education — compared with 21 percent at the top-performing places.

Barnett, Hsu, and McWilliams also looked at what would happen if Medicare did control for all 29 factors they examined in their study. And they saw something startling: The difference in readmission rates between top and bottom performers was cut nearly in half (48 percent).

In other words, these researchers argue that about half the difference between hospitals with really high and low readmission rates has nothing to do with the type of health care they provide. It has everything to do with those hospitals seeing sicker, more complex, and more vulnerable patients.

This could result in a vicious cycle: Hospitals that see sick patients end up with higher penalties, lose money, and end up with less money to manage their already complex patients.

"We knew the safety net was more at risk in this program, but what had not been done before this was getting a rich picture of how much they differ," says study co-author Michael Barnett. "Now we can see how starkly things differ. And it's unfair to allow the status quo to continue."

Should the White House scrap the readmissions program?

When I spoke to Barnett and McWilliams, they didn't suggest scrapping the readmissions penalty altogether. Nor did they think that Medicare could account for all 29 complex factors that their study did — surveying millions of Medicare beneficiaries on these issues would be a huge undertaking.

At time same time, they suggested some ways Medicare could make the program fairer to hospitals that serve disadvantaged patients. It could use data that the program already has and factor in, for example, whether a patient also uses Medicaid, the public program for low-income Americans.

"Those are very low hanging fruit," McWilliams says. "That's something they could implement relatively easy, and quickly too."

In a statement, Dr. Patrick Conway, acting CMS principal deputy administrator and CMS chief medical officer said the agency is researching the impact of socioeconomic status on the Hospital Readmissions Reduction Program.

"We will continue to work with all stakeholders to seek feasible ways to encourage hospitals to reduce hospital readmissions while addressing any unintended consequences, particularly for those hospitals serving dual-eligible and low-income beneficiaries," he said.

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