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Penalized for Patient Complications: 774 Hospitals Set to Lose Medicare Funding


Some of the country’s biggest hospitals and medical centers will lose Medicare funding due to high rates of infection and preventable patient complications, according to the federal government. The facilities are being cited for their lack of safety based on data collected between 2017 and 2019.

The U.S. healthcare system had a problem with infectious disease before the coronavirus was even on our radar, and 500,000 Americans have already died from COVID-19. As we mark this grim milestone, healthcare officials are reckoning with their facilities’ lack of infection control.

What do the Penalties Mean?

The penalties will affect 774 healthcare facilities all over the country, which will now lose 1% of their Medicare funding over the next 12 months. The penalties were enacted as part of the Affordable Care Act, which set them up as a way of motivating hospitals and health systems to better protect patients from infection and preventable health complications. These complications increase the cost of care, prolong hospitalization, and even kill patients.

According to the CDC, on any given day, one in 31 hospital patients will develop an infection or complication during their stay. “Although significant progress has been made in preventing some healthcare-associated infection types, there is much more work to be done,” the agency says.

The government created the Hospital-Acquired Condition Reduction Program seven years ago to make sure hospitals were protecting their patients from infection and complications. Medicare also looks at hospital readmission rates when determining reimbursements to avoid paying for substandard care. However, since its founding, healthcare administrators argue that the government is levying penalties arbitrarily. The current law states that the government must penalize the top 25% with the highest rates of infection and patient complications.

HHS looks at the number of recorded infections, blood clots, sepsis cases, bedsores, hip fractures, and other complications that occur in hospitals to see if they could’ve been prevented. The penalty is then based on how much Medicare pays the hospital during the fiscal year.

However, some healthcare facilities may get penalized even if they have improved substantially compared to the year before, while others may escape detection if they stay out of the top 25%. Akin Demehin, director of policy at the American Hospital Association, refers to the penalties as “a game of chance” based on “badly flawed” measures.

Major facilities may also be penalized for not being more thorough with their reporting. The more complications regulators find, the more public health funding these facilities could lose.

Dr. Karl Bilimoria, vice president for quality at Northwestern Medicine, whose hospital is being penalized this year, said, “The all-or-none penalty is unlike any other in Medicare’s programs.” He said Northwestern takes the penalty seriously because of the amount of money at stake, and also says, “But, at the same time, we know that we will have some trouble with some of the measures because we do a really good job identifying complications”.

Some of the most prestigious facilities in the country are being hit with penalties, including Ronald Reagan UCLA Medical Center and Cedars-Sinai Medical Center in Los Angeles; UCSF Medical Center in San Francisco; Beth Israel Deaconess Medical Center and Tufts Medical Center in Boston; NewYork-Presbyterian Hospital in New York; UPMC Presbyterian Shadyside in Pittsburgh; and Vanderbilt University Medical Center in Nashville, Tennessee.

In total, 2,430 hospitals will not be penalized under these guidelines. Another 2,057 were automatically excluded because they serve children, veterans, or psychiatric patients, or have been designated a “critical access hospital,” which means it’s one of the only facilities in the area.

Recent reporting from the Kaiser Health Network shows that the penalties are being levied unevenly across the country. Half of Rhode Island’s hospitals were penalized, as well as 30% of Nevada’s. Meanwhile, all the hospitals in Delaware escaped punishment. The government also excludes Maryland because it pays them through a different reimbursement system.

Losing Funding in the Middle of a Pandemic

For many hospitals are medical facilities, the timing of these penalties couldn’t be worse. Many companies are hurting due to the ongoing pandemic. Some areas have had to cancel elective procedures so staff can ration care and focus on treating those suffering from COVID-19. 

According to the American Hospital Association (AHA), the pandemic led to a $320 billion decline in hospital revenues during 2020. A recent survey shows that two-thirds of hospital executives said they expect a 15% shortfall in annual revenues, with almost one-fifth of executives projecting a shortfall of 30% or more. 

These cuts could worsen the revenue system for many facilities across the country. They may have to scale back resources, services, or staff to keep their operating expenses as low as possible.

Room for Improvement

As backlash over the penalties continues to grow, the government created The Medicare Payment Advisory Commission to assess whether the penalties were being levied fairly.

In a 2019 report, the commission found that “it is important to drive quality improvement by tying infection rates to payment.” However, it also found that the government shouldn’t use a “tournament” model when issuing fines and penalties. This system compares one facility to another instead of creating fixed targets for reducing infection and patient complications. 

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