In the US hospitals face significant financial penalties for excessive unplanned hospital readmissions. In Australia there are no financial penalties on hospitals with high readmission rates. The result is higher unplanned hospital readmission rates in Australia as compared with the USA and the OECD.

Factors contributing to readmission include premature discharge home, inadequate post-hospital support, poor hospital follow-up, and complications stemming from a hospital stay such as pressure ulcers and hospital-acquired infections.

Research shows that readmissions for older Australians are most often caused by incorrect use or discontinued use of medication and not attending follow-up doctor's appointments. These risk factors increase in cases where the patient lacks a family support system at home.

The fact is, that regardless of the cause, someone has to fit the bill for unplanned hospital readmissions.

Writing for the Brisbane Times, Tim Binsted and Jessica Gardner have identified that health insurers and private hospitals are fighting over who meets unplanned readmission expenses. Of course, in public hospitals the taxpayer gets to pick up the tab. In Australia public hospital total readmission rates have been as high as 2.75% while for private hospitals it is much lower at 0.53%.

Binstead and Gardner quote the president of the Australian Medical Association (AMA), Dr Brian Owler, who says strict contract clauses being pushed by Medibank Private have put financial risk for unplanned patient readmissions and preventable falls back on private hospitals. Owler says that this is evidence the newly listed market leader has shifted its priority from patients to shareholders. Owler says, "Medibank has to grow its market share and it has to grow dividends for shareholders. Pressure will be put back onto the patient."

However, the chief executive of health insurer NIB, Mark Fitzgibbon, has backed his larger rival, saying hospitals need to be held accountable for quality care, and claims of over-servicing of patients and wastage need to be tested.

Binstead and Gardner, quoting Morgan Stanley analyst Daniel Toohey, say, "Over the past seven years earnings margins across the private hospital industry increased by 20 to 25 per cent, while average insurer gross margins have shrunk despite premiums rising around 6 per cent a year. Listed private hospital players Healthscope and Ramsay Health Care are enjoying particularly robust profit growth."

While the AMA is supporting private hospitals with growing margins, health insurers face increased cost pressures that they have little control over without hospital cooperation. Hospitals can, of course, reduce readmissions by keeping patients longer, charging $600 to $1,000 per bed per night. That's good for the hospitals but not so good for the insurers.

Why focus on hospital readmissions? Healthcare costs are rising, due in part to a growing and ageing population. With 650 baby-boomers turning 65 every day in Australia, life expectancies increasing, and an ageing nation consuming more healthcare, the answer is simple—the industry can't afford not to.

Market forces are fundamentally changing the business of healthcare into an outcomes-based system that compensates organisations based on the effectiveness of a product or service. Patients certainly don't want to end up back in hospital and most would rather recover at home than spend extra days or weeks in hospital.

The community is demanding no compromises on care, but the big question is who is going to pay. Insurers can only put up insurance premiums so far, because pressure on affordability is pushing health fund members to downgrade or ditch their cover.

Health funds want hospitals to take more responsibility on the cost of hospital readmissions.

The AMA reaction to insurance company pressure means they haven't made the essential connection necessary to reduce hospital readmissions. What both parties have not realised is that workable prevention measures can be put in place! These measures cost way less than the cost of treating preventable readmissions and lengthy hospital stays.

The US experience, with their readmission penalties, have driven the development of new approaches to reduce readmissions. These may be instructive for us here in Australia.

Julie Henry writing for Healthcaredive.com has identifies two approaches to readmissions that have been found to be successful and way cheaper than hospital beds.

Home Care management program

Researchers at Atlanta-based Barnes Healthcare Services recently conducted a study to see if a patient management program that included non-invasive ventilators and in-home care would reduce readmission rates for patients with chronic obstructive pulmonary disease (COPD). The study, which was co-authored and funded by Royal Phillips and published in the Journal of Sleep Medicine, examined 397 patients who had all been hospitalized at least twice in a single year with an acute COPD exacerbation. Each patient was prescribed a ventilator for home use. Continued in-home care consisted of medication management, personal care, oxygen therapy, patient education and on-going respiratory physiotherapist care in the home.

Within one year, the proportion of COPD patients who were readmitted on two or more occasions decreased from 100% (397 of 397) to 2.2% (9 of 397).

Put into perspective, the Australian Institute of Health and Welfare quote the rate of COPD admissions in Australia on two or more occasions as 4%. COPD has the highest readmission rate of any other condition in Australia at over 62,000 a year. The AIHW says avoidable hospital admission rates for asthma and COPD in Australia were around 50% higher than the OECD average.

Dr. Sairam Parthasarathy, professor of medicine at the University Medical Center Tucson says

"The Barnes Healthcare study holds promise in how a multifaceted intervention could assist health systems in significantly improving the care of the patients with advanced stage COPD in their home. The results indicate that patients placed on this advanced mode of non-invasive ventilation, combined with an in-home care program, can reduce hospitalisations and subsequently reduce healthcare utilisation."

Comprehensive disease management program

With the help of a Beacon Community grant that was funded through the American Recovery and Reinvestment Act, Carolinas HealthCare System conducted a comprehensive disease management pilot program in an attempt to reduce COPD admissions. The program focused on continuous identification and follow-up of patients with COPD. It included the following strategies:

  • Conducting a root cause analysis on COPD readmissions
  • In-home care for up to 90 days to help the patient recover and ensure correct medication management
  • Scheduling follow-up appointments within two to seven days of hospital discharge and monthly thereafter.
  • Appointing case managers and home care support to ensure follow-up calls to patients within 48 hours of discharge and as needed for up to 90 days
  • Providing patients with disease management education by respiratory physiotherapists
  • Educating inpatients on disease management and proper use of inhalers

During the program, the COPD readmission rate at Carolinas HealthCare dropped from 21.8% to 13% over a three-year period. Dr. Jean Wright, vice president of innovation at Carolinas HealthCare, told Healthcare Financial Management that organisations should start to reduce their COPD readmission rates by focusing on just three to five strategies so they do not become overwhelmed.

These two studies in the US show unequivocally that disease management and post discharge home care reduce readmissions. Private hospitals and health insurance companies can reach a cost effective compromise.

There is no doubt; the cost of home care and focused health education is a fraction of the cost of a hospital bed on readmission.

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