Here's How Obamacare Is Keeping People Out Of The Hospital

New penalties for hospitals seem to have dramatically reduced the number of people readmitted with complications.
Improving the quality of health care is difficult, but it's not exactly brain surgery.
Improving the quality of health care is difficult, but it's not exactly brain surgery.
Thierry Dosogne via Getty Images

The Affordable Care Act was supposed to keep hospital patients from returning after discharge because of medical complications and poor follow-up care.

For something like a half-million people over the last five years, the law appears to have done just that -- although the evidence, as usual, isn't quite definitive.

The Department of Health and Human Services on Wednesday announced that the rate of hospital readmission -- that is, the number of patients returning to the hospital within 30 days of discharge -- has dropped dramatically since 2010, when President Barack Obama signed the health care law. That’s a big deal, because reducing readmissions is one of Obamacare’s explicit goals.

As the theory goes, readmission is usually a marker for poor quality medical care. It can mean that patients aren’t getting the right instructions about taking their medications, for example, or that they aren’t receiving the proper recovery and rehabilitation services. That’s bad for the patients, obviously. It’s also bad for the health care system -- since every return visit to the hospital strains resources and drives up the nation’s health care bill.

Previously, hospitals had little financial incentive to avoid readmissions, since return visits meant more services and more income. The Affordable Care Act sought to change that, by modestly reducing Medicare payments to hospitals with high rates of readmission for three key conditions: acute myocardial infarction (heart attack), heart failure, and pneumonia. (Recently, the penalties expanded to include two other conditions.)

At the same time, the health care law created programs like the Partnership for Patients, which provides extra financial support to hospitals that develop new ways of improving the quality of care.

Sure enough, the readmission rate began to drop following the law’s enactment, with a sharper decline among the three conditions that the penalties targeted. And in the five years that followed, HHS announced on Wednesday, there were 565,000 fewer admissions overall. “That’s 565,000 times that a patient didn’t have to experience an extra hospital stay,” Rachel Zuckerman, an HHS economist, wrote in a blog post that appeared on the agency’s website Wednesday.

By itself, the decline doesn’t prove that patients are getting better care -- or even avoiding the hospital. Many experts have speculated that hospitals are simply giving “observation” status to many returning patients. Observation status is basically a form of accounting limbo in which patients stay in hospital beds, getting hospital treatments, but don’t officially count toward hospital admission tallies. In theory, a hospital could use observation status more frequently in order to avoid incurring the new penalties, but without improving patient care.

HHS economists decided to examine this possibility by studying the increase in observation status and seeing whether it could account for all or even most of the readmissions decline. The answer appears to be no. In a new paper, which the New England Journal of Medicine published on Wednesday, the HHS researchers concluded that readmissions came down substantially, even after accounting for patients returning via observation status.

Hospitals may still be gaming the system, of course. (Some almost surely are.) But the data implies strongly that hospitals are taking other actions to reduce readmissions. And that would be consistent with anecdotes of hospitals trying innovative techniques for follow-up care -- like assigning social workers to the patients at higher risk of readmission, or sending visiting nurses to patients following discharge.

Don Berwick, founder of the Institute for Healthcare Improvement and former administrator for Medicare and Medicaid, told The Huffington Post he thought the study was "well-designed and well-analyzed." It "weakens the assertion that hospitals reduced ... readmission rates by reclassifying patients as in observation status," Berwick said.

But Berwick, a pioneer in the movement to reduce medical errors and provide better treatment, also cautioned that "the paper sheds no light on the question as to whether reducing readmissions was favorable or unfavorable for overall quality of care, and for whom."

Critics of the new incentives have worried that they may penalize hospitals that happen to have patients who are in worse health or who, because of socio-economic factors, are less likely to have the supports necessary for successful recovery and rehabilitation.

Berwick said one remedy is to provide extra financial support for safety-net hospitals, the ones that treat the poorest and sometimes neediest patients, so that they still have incentive to hold down readmissions -- along with the resources to do something about it.

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