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Beaufort Memorial faces Medicare funding reduction

This story was updated at 11:15 a.m. Aug. 11, 2016, after the newspaper received updated figures for individual procedures’ readmission rates from Beaufort Memorial Hospital.

Beaufort Memorial Hospital’s high readmission rates — particularly for hip and knee replacement procedures — will result in an almost $950,000 loss in Medicare reimbursement money, the highest cut of any hospital in the state.

Studies have found the federal government’s Readmissions Reduction Program, which aims to reduce the number of patients returning to hospitals within a month of their original stay, to be relatively successful.

That wasn’t the case at Beaufort Memorial Hospital.

The Centers for Medicare and Medicaid Services cut three percent of the Beaufort Memorial’s reimbursement money for the third consecutive year. The fines take effect Oct. 1 and run through September 2017.

The agency’s decision made Beaufort Memorial the only hospital in South Carolina — and one of just 49 in the nation — to receive the maximum cut in reimbursement money, according to data analyzed by Kaiser Health News, a nonprofit national health policy news service.

Medicare funding was also cut at the area’s two other hospitals - Hilton Head Hospital and Coastal Carolina Hospital.

For every Medicare patient discharged, Beaufort Memorial will lose $202.90, said Jeff White, the hospital’s chief financial officer.

That might not seem like a lot of money, but at a hospital where Medicare discharges represent almost half of the hospital’s total adult discharges, the reimbursement reduction matters.

“The penalties will come right out of net patient revenue,” said White. “It will have an impact.”

Shawna Doran, the hospital’s corporate director of quality, said in an email Tuesday, “We are actively working to prevent avoidable readmissions among all patients, not just the Medicare population this data reflects. Overall, compared to the previous year, we’ve improved our (overall) readmission rate.”

All three area hospitals have been penalized each of the five years of the program, according to Kaiser Health News.

The CMS data shows that, for the upcoming fiscal year, Coastal Carolina Hospital will lose 0.57 percent in reimbursement money.

Hilton Head Hospital will lose 1 percent.

Jeremy Clark, CEO of both hospitals, declined to disclose how much the reduction will amount to in dollars, instead saying in a Wednesday email that the hospitals are “focused on providing excellent care to our patients rather than focusing on the financial impact.”

3%Beaufort Memorial Hospital

1%Hilton Head Hospital

0.5% Coastal Carolina Hospital

CMS calculated 30-day readmission rates for Medicare patients treated for the following: heart attack, heart failure, pneumonia, chronic lung disease, hip and knee replacements and coronary artery bypass graft surgery.

Beaufort Memorial Hospital’s readmission rates were below the national average for four of the five conditions, according to a report supplied by the hospital. (The readmission rate for coronary artery bypass graft surgery was not listed.)

The trouble came with readmissions for hip and knee replacements. Of the 612 joint replacement procedures performed on Medicare patients from July 2012 through June 2015, 40 returned within 30 days, according to hospital data.

Hospital spokeswoman Courtney McDermott attributed that high readmission rate to 2013, which accounted for nearly 50 percent of all joint replacement readmissions in the three-year reporting period.

By comparison, the last six months of the reporting period saw just three readmissions for joint replacements, McDermott said.

Encouraging quality over quantity

Because Medicare was set up as a fee-for-service-system, hospitals are financially rewarded based on the number of patients treated.

“(The Readmissions Reduction Program) is a correction to an earlier system that incentivized volume as opposed to value,” said Amanda Starc, a health care management professor at the Wharton School of the University of Pennsylvania. “The idea is to provide value to patients without costing the federal government tons of money,” she said.

Potentially avoidable hospital readmissions are estimated to account for $12 billion in Medicare expenditures annually, according to a New England Journal of Medicine study.

Beaufort Memorial Hospital’s strategy to reduce readmissions involves a Duke Endowment grant that established a Transitional Care Program to assist at-risk patients in the transition home, Doran, the hospital’s quality director, said.

‘Counting’ controversy

The Readmissions Reduction Program is not without controversy.

Patients can be counted twice if conditions overlap.

And situations such as a car accident that sends a patient back to the hospital for completely unrelated treatment might result in double counting.

But Starc, the health care professor, pointed out that calculations are risk-adjusted, meaning the health of each hospital’s patients is taken into account. Hospitals who serve sicker or older populations — who are more likely to return with complications — aren’t disadvantaged, she said.

The Affordable Care Act, which established the program, exempted more than 1,400 hospitals, including those serving children, veterans and psychiatric patients.

The cuts don’t affect hospitals who train residents or treat large numbers of low-income patients. Critical access hospitals - facilities that are the only in the area to provide care - are also reimbursed differently.

Despite all of these exemptions, CMS cut $528 million from more than half of the nation’s hospitals, Kaiser Health News reported. The reduced funding applies to all Medicare cases, not just when one of the six measured conditions is being treated.

Kelly Meyerhofer: 843-706-8136, @KellyMeyerhofer