What is the Background?
For years, health policy experts have identified poor care transitions as a major contributor to poor quality and waste. The 2001 Institute of Medicine (IOM) report, Crossing the Quality Chasm, described the U.S. system as decentralized, complicated, and poorly organized, specifically noting “layers of processes and handoffs that patients and families find bewildering and clinicians view as wasteful.”
The IOM noted that, upon leaving one setting for another, patients receive little information on how to care for themselves, when to resume activities, what medication side effects to look out for, and how to get answers to questions. As a result, the conditions of many patients worsen and they may end up being readmitted to the hospital. For example, nearly one fifth of fee-for-service Medicare beneficiaries discharged from the hospital are readmitted within 30 days; three quarters of these 74readmissions, costing an estimated $12 billion a year, are considered potentially preventable, especially with improved care transitions.
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There are several root causes of poor care coordination. Differences in computer systems often make it difficult to transmit medical records between hospitals and physician practices. In addition, hospitals face few consequences for failing to send medical records to patients’ outpatient physicians upon discharge. As a result, physicians often do not know when their patients have been released and need follow-up care. Finally, current payment policies create disincentives for hospitals to invest in smoother care transitions. For example, although Medicare does not allow hospitals to bill for readmissions that occur within 24 hours of discharge, it does pay full price for most readmissions that occur after that time. This means that the prevailing financial incentive for hospitals is to not expend resources on improving care transitions because a poor transition often leads to readmission, which generates additional revenue.
Moreover, some analysts believe that Medicare and Medicaid payment policies have unintentionally created incentives to unnecessarily transfer patients back and forth between hospitals and nursing homes. Their suspicion is that nursing homes, which are primarily paid by Medicaid with generally low payment rates, unnecessarily transfer patients to hospitals to qualify for more generous Medicare payment rates when their patients return to them after discharge.
Lending credence to this claim, researchers have found that states with lower rates of Medicaid spending on dual-eligible patients under age 65 (people who are eligible for both Medicaid and Medicare) have higher rates of Medicare spending on these patients, and vice versa, suggesting that providers are gaming the system.