A quality conundrum: How changing CMS reimbursement rates affect patient care

April 25, 2016

By Jake Vugrinac, Director of Business Development

We all read different things for different reasons.  Whether for business or pleasure, our taste in literature is diverse and unique.   Some of us enjoy immersing ourselves in the adventures of boy wizards, the love life of vampires or the impending doom that zombies pose to civilization.  I am not one of those people; I am a numbers guy.  I prefer curling up next to the

My idea of a fun Saturday night.

My idea of a fun Saturday night.

fire with a riveting essay on sabermetrics in baseball.  And I realize I am in the minority here.  Most “normal” people don’t experience the warm embrace of contentment that can only come from your credits matching your debits.  I feel for people who will live a life devoid of the joy that only regression analysis and data sets can bring.  But today, I will try to bridge the gap between “numbers” people and “normal” people.  Regardless of your reading preferences, we all need to know the consequences that changing reimbursement rates have on health care.

  • 2012 study of nationwide hospital reimbursement data shows higher Medicare reimbursement rates led to an increase in length of care for enrollees.
  • CMS needs to take a good look at their payment structure and reevaluate how it calculates reimbursement rates to eliminate the discrepancy in length of stay between hospitals.
  • Reimbursement changes will continue to send shock waves through hospitals and physicians nationwide and those in the position to make these changes need to be cognizant of that.

I recently read a thesis, “Medicare’s Prospective Payment System: Do Differences in the Reimbursement Rate Affect Quantity of Care Delivered and Hospital Billing Practices?”, by Russell Hollis, a graduate of Duke University’s economics program.  This thesis investigated the correlation between changes to reimbursement rates and the quantity of health care received by length of stay.  The scope of this research included 470,000 patients in 2,696 hospitals in 2012.  In order to eliminate variables that could skew the results, the scope was limited to major replacement or reattachment of the lower extremity, DRG 470 (no complications) and DRG 469 (with complications) (Hollis, 2).

The question posed is an important one: What effects do changing reimbursement rates have on patient care?  Changes in reimbursement rates are an unavoidable variable.  CMS is running out of money.  Because of this, they are changing the way they pay for hospital care.   By rewarding hospitals for delivering services of higher quality and higher value, they intend to drive down costs.  But to what degree will changes in CMS compensation to hospitals affect the treatment of the Medicare enrollees?  To find this answer, we will have to research how the treatment of patients differs by various hospitals receiving different compensation in Medicare reimbursement for the same diagnosis.  Finding the analytical answer to this question is where it gets a little…dry.  For the convenience and dwindling attention span of my audience, I will skip to the results and leave you to explore the delicate whimsy of regression analysis on your own time.

The study found that a 1 percent increase in reimbursement led to a .007 percent (James Bond’s favorite percentage) increase in the length of stay for DRG 470 and a .057 percent increase for DRG 469 (Hollis, 33).  This data shows that even though the correlation may seem small, there is a significant trend that is a direct result of Medicare policy (Hollis, 33).  As their compensation increases, hospitals are willing to keep their patients longer.  This makes good business sense to me; if you pay me more, then I am willing to do more for you.  Health care is a business after all and there must be an exchange of goods and services.  But isn’t that the exact predicament that value-based medicine is supposed solve?

The results show that these trends are a result of CMS policy changes.  The RUC Committee and policymakers need to be aware of the considerable clout and reach that they wield.  Reimbursement changes will continue to send shock waves through hospitals and physicians nationwide and those in the position to make these changes need to be cognizant of that (Hollis, 33).  CMS needs to take a good look at their payment structure and reevaluate how it calculates reimbursement rates to eliminate the discrepancy in length of stay between hospitals.  We need continued analytical research on the ramifications that these types of policy changes have on hospitals, both directly and indirectly (Hollis, 34).  The answer to this problem, like most things, is in the numbers.  Now if you will excuse me, my fellow nerds and I will retire to the nerdery with our calculators.

Contact Jake at jvugrinac@vachettepathology.com, or call 517-486-4262.

 

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