Not observing games

PPACA has been attempting to bend the cost curve by penalizing stupid and avoidable errors.  One class of errors that has been amenable to reduction has been Medicare beneficiaries getting  re-admitted to hospitals  after their initial admission for a set of circumstances.  As soon as data started to be collected and before penalties started to be imposed, the readmission rate crashed.  Since penalties have been imposed, the rate is still going down but at a slower pace.  This does two things to the cost curve.  First, it reduces direct Medicare expenses as Medicare is not paying for another hospital day.  Secondly, changes in practices and procedures that result in lower Medicare readmission rates tend to diffuse throughout a hospital and all of its patients so people who are not covered by Medicare also benefit from the improvement in practice.

This sounds great.  We save money, save Grandma as hospitals are where old people die, and get better quality care.

However, wonks have worried that any quality measure that has real money attached to it can and will be gamed.

The easiest way to game a re-admission measure is to redefine admissions.  Hospitals have the ability to put people on “observation” status where to anyone but the billing and quality metrics department, the person looks like they are admitted.  They get the uncomfortably flimsy robe, they get the wrist band, they get poked and prodded and monitored just like an admitted patient.  They can stay in observation status for a time period including one midnight.  Yet these individuals are not part of the “admitted” or “re-admitted” population universes.

There was a possibility that a significant chunk of the seemingly great decline in readmission rates was really a bureaucratic shift of people getting moved from short term admissions to observation status.

That is not the case.

The New England Journal of Medicine  * has an interesting study on this matter:


We analyzed data from 3387 hospitals. From 2007 to 2015, readmission rates for targeted conditions declined from 21.5% to 17.8%, and rates for nontargeted conditions declined from 15.3% to 13.1%. Shortly after passage of the ACA, the readmission rate declined quickly, especially for targeted conditions, and then continued to fall at a slower rate after October 2012 for both targeted and nontargeted conditions. Stays in observation units for targeted conditions increased from 2.6% in 2007 to 4.7% in 2015, and rates for nontargeted conditions increased from 2.5% to 4.2%. Within hospitals, there was no significant association between changes in observation-unit stays and readmissions after implementation of the ACA.

Monthly readmission rates for targeted conditions were already decreasing before passage of the ACA (slope of monthly rate, −0.017 [95% confidence interval {CI}, −0.022 to −0.012]), fell even more rapidly after implementation of the ACA (slope, −0.103 [95% CI, −0.107 to −0.098]), and then slowed during the long-term follow-up period to −0.005 (95% CI, −0.010 to −0.001). Readmission rates for nontargeted conditions were falling at a monthly rate of −0.008 (95% CI, −0.010 to −0.006) before passage of the ACA and then decreased significantly after its enactment (post-ACA slope, −0.061 [95% CI, −0.063 to −0.059]); however, the rates for nontargeted conditions were not decreasing as quickly as the rates for targeted conditions (difference between targeted and nontargeted slopes, −0.042 [95% CI, −0.046 to −0.037]). Finally, readmission rates for nontargeted conditions slowed to a slope of −0.004 (95% CI, −0.006 to −0.002) during the long-term follow-up period.


So the drop in re-admissions and the implied increase in quality seems to be real. This means the hospitals are getting more productive and better at keeping people a little bit healthier after their initial visit.  It could also mean that hospitals are doing a better job of identifying probably re-admission risk and delivering needed services in a non-hospital (and thus much cheaper) setting which is still a double win for cost and quality.

* Real Citation:

Readmissions, Observation, and the Hospital Readmissions Reduction Program
Rachael B. Zuckerman, M.P.H., Steven H. Sheingold, Ph.D., E. John Orav, Ph.D., Joel Ruhter, M.P.P., M.H.S.A., and Arnold M. Epstein, M.D.
February 24, 2016DOI: 10.1056/NEJMsa1513024

5 replies
  1. 1
    laura says:

    Observation can be a nightmare if your trying to access other benefits and services. My mother’s dementia alone wasn’t enough to get her into long term care. Sadly/luckily, a psychotic break caused by a uti got her to the emergency room for observation, but a kind and compassionate er doctor agreed to admit her to treat the uti for the necessary 3 days and allow medicare to kick in and the patient advocate helped me find a suitable care facility with space. Had this not happened, dad and I simply could not cope with the increasing level of care needed.
    Observation is the nod and wink to avoid providing costly, necessary care.

  2. 2
    OzarkHillbilly says:

    Another thing we can blame Obama for.

  3. 3
    Big R says:

    Richard, my not-terribly-bright, but very sweet uncle, who I talked into overestimating his income so he would qualify for subsidies, now says his insurer wants his 1040 to confirm his income. When did the insurer acquire the power to confirm subsidy eligibility? I thought that was between the taxpayer and the IRS.

  4. 4
    Hillary Rettig says:

    @laura: Sounds awful – and I’m so glad you you found the compassionate doctor.

  5. 5

    @Big R: Only the IRS can verify income as far as I know

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