Medicare Penalty on Hospital Readmissions

Telemedicine – The Solution to the Medicare Penalty on Hospital Readmissions

Withholding Medicare Reimbursement

In November 2017, the Centers for Medicare and Medicaid Services (CMS) introduced an update to the initiative to reduce return hospitalizations for skilled nursing facilities (SNF). Starting in October 2018, there will be a 2 percent withholding of Medicare reimbursements for SNFs with higher occurrences of patients that are re-hospitalized within 30 days for medical conditions that could have been treated at the SNF. The CMS plan is to redirect that some of those funds back to high-performing SNFs.


In 2015, CMS in participation with Enhanced Care and Coordination Providers tested a new payment model to see if they could reduce re-hospitalizations for conditions they considered acute and could be treated at the facility instead of the hospital.  They focused on six medical conditions:

  • Pneumonia
  • Dehydration
  • Congestive Heart Failure
  • Urinary Tract Infection
  • Skin Ulcers/Cellultis
  • Chronic Obstructive Pulmonary Disease/Asthma

CMS is making SNFs more accountable for care they provide.

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Will it Work?

Keeping patients out of the hospital reduces Medicare costs.  In 2013, the Department of Health and Human Services’ Office of the Inspector General (OIG) found that Medicare spent 33 percent more on SNF residents admitted to hospitals than the average spent for all Medicare patients.

However, there are some that question the success of this initiative.  To successfully reduce hospital readmissions, there must be good communication between the hospitals and the SNFs.  Continuity of care is key.  The hospital staff and the SNF staff must be on the same page regarding the patient’s care plan – medications, therapy, follow-up care.

Telemedicine Provides the Key to Success

The key to success for the SNFs is to make sure they have the resources and clinical expertise they need to provide top care to their residents.  Telemedicine provides both the resources and clinical expertise.  Telemedicine enables the SNF to have immediate access to a medical professional that, with the help of an SNF staff member, can use diagnostic tools to diagnose and treat the patient.  As we explained in Costs Benefits of Telemedicine, 30-67 percent of hospitalizations could have been prevented with intervention, using technology such as telemedicine. The average savings to Medicare for nursing homes using Telemedicine services would be between $120,000 to $151,000 per nursing home per year.   Keep in mind, that’s in addition to avoiding the 2 percent reimbursement penalty and possibly receiving the funds being diverted to the higher-performing SNFs.

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