A Comparison of Estimated Cost Savings from Potential Reductions in Hospital-Acquired Conditions to Levied Penalties...

Area of Science:

• Health Economics
• Healthcare Policy
• Patient Safety

Background:

• The Centers for Medicare & Medicaid Services (CMS) implemented the Hospital-Acquired Condition Reduction Program (HACRP) to penalize hospitals with high rates of hospital-acquired conditions (HACs).
• The financial impact of HACRP penalties on CMS has not been directly compared to the potential cost savings from actual HAC reductions achieved through the program.

Purpose of the Study:

• To compare the financial savings to CMS from HACRP penalties with the estimated savings from reductions in HACs.
• To evaluate the effectiveness of HACRP in generating cost savings versus incentivizing HAC reduction.

Main Methods:

• Analysis of a 20% random sample of Medicare claims data from January 1, 2009, to September 30, 2014.
• Evaluation of the association between HACs and 90-day episode spending, adjusted to 2015 dollars.
• Estimation of potential annual Medicare savings from a 1%-20% relative decrease in HAC incidence, compared to HACRP penalties reported in 2015.

Main Results:

• All HACs were linked to significant increases in 90-day episode spending, with costs ranging from $3,183 (iatrogenic pneumothorax) to $21,654 (postoperative hip fracture).
• Estimated annual Medicare savings from a 1%-20% HAC reduction ranged from $2.2 million to $44 million.
• Actual HACRP penalties levied on hospitals totaled $361 million annually, substantially exceeding estimated savings from HAC reductions.

Conclusions:

• HACRP penalties significantly outweigh the potential cost savings derived from HAC reductions spurred by the program.
• The financial penalties imposed by HACRP appear disproportionately high compared to the achievable cost savings from reduced hospital-acquired conditions.