Problematic Risk Adjustment in National Healthcare Safety Network Measures.

This article reviews the risk-adjustment models underpinning the National Healthcare Safety Network (NHSN) standardized infection ratios. After first describing the models, the authors focus on hospital intensive care unit (ICU) designation as a variable employed across the various risk models. The risk-adjusted frequency with which ICU services are reported in Medicare fee-for-service claims data was compared as a proxy for determining whether reporting of ICU days is similar across hospitals. Extreme variation was found in the reporting of ICU utilization among admissions for congestive heart failure, ranging from 25% in the lowest admission hospital quartile to 95% in the highest. The across-hospital variation in reported ICU utilization was found to be unrelated to patient severity. Given that such extreme variation appears in a designation of ICU versus non-ICU utilization, the NHSN risk-adjustment models' dependence on nursing unit designation should be a cause for concern.

Conceptual errors in the CMS refusal to make socioeconomic adjustments in readmission and other quality measures.

The Centers for Medicaid & Medicare Services has made a policy decision that socioeconomic factors should not be adjusted for in its various quality measures and point both to arguments made by the National Quality Forum and to analysis of the distributions of quality results to support this view. We present counterarguments to this viewpoint and use the results reported by the Centers for Medicaid & Medicare Services to support its position to demonstrate that adjustments are necessary. We further argue that the incentives for providers to improve performance would not be weakened by including socioeconomic factor adjustments.

Hospital readmission rates: the impacts of age, payer, and mental health diagnoses.

We examine impacts of age, payer, and mental health conditions upon hospital readmissions and the comparability of same-hospital and multiple-hospital readmission rates. Medicaid primary payment and extreme age are associated with significantly higher readmission rates. We find low correlation between same-hospital and multiple-hospital readmission rates and identify urban hospitals with high proportions of Medicaid patients and mental health admissions as factors driving the use of multiple hospitals within readmission chains. Hospital payment incentives and performance measures using readmission rates will be distorted if factors leading to higher readmission rates are ignored, or if readmissions to different hospitals cannot be identified.

State hospital rate-setting revisited.

In an attempt to control rapid growth in hospital costs, beginning in the mid-1970s several states implemented rate-setting programs to regulate hospital payments. In seven states, rate-setting was in effect for a substantial period of time (14 years or more). While most of these programs were discontinued by the mid-1990s, two are still active. In five of the seven states, the rates of increase in hospital costs were lower than the corresponding national rates during the periods in which the regulation programs were in place. Four of the states--Maryland, Massachusetts, New York, and New Jersey--had some of the lowest rates of hospital cost increases among all the states. This indicates that hospital rate regulation may be a useful approach in managing a major component of health care spending.

The use of ambulatory patient groups for regulation of hospital ambulatory surgery revenue in Maryland.

The Maryland Health Services Cost Review Commission (HSCRC or the commission) is a government agency with the authority to establish rates for both inpatient and outpatient services for all general acute care hospitals in the state. By law and consistent with the state's unique Medicare waiver, all payers (including Medicare and Medicaid) must pay hospitals on the basis of these rates. The HSCRC has used diagnosis related groups to set case-mix-adjusted limits on the revenue per discharge for inpatient services (similar to Medicare inpatient prospective payment nationally) yet, the Maryland rate-setting system for outpatient services has not embodied incentives to control utilization of services. Beginning in the state's fiscal year 2008, the HSCRC is implementing regulation of ambulatory surgery services using ambulatory patient groups to provide better incentives to control utilization, and to facilitate comparisons of the case-mix-adjusted charges per ambulatory surgery case across hospitals. Maryland has been an innovator in the design and successful implementation of payment systems and other incentive mechanisms to constrain hospital cost, maintain payment equity, and ensure access to needed hospital care. The HSCRC's adoption of all patient refined diagnosis related groups and the hospital-specific relative value method for establishing diagnosis related group weights in 2005 was relevant to the Centers for Medicare and Medicaid Services' decision to move to Medicare severity diagnosis related groups beginning in federal fiscal year 2008, and to consider the use of hospital-specific relative value weights. The HSCRC's decision to use ambulatory patient groups for ambulatory surgery is an attempt to apply the most effective features of inpatient payment systems, prospective payment, including incentives to control service volumes. As such, it represents a radical departure from prevailing payment arrangements in that it seeks to remove the traditional distinction between inpatient and outpatient surgical services, a distinction that has blocked the development of effective and well-integrated outpatient payment systems for decades. This article describes the policy rationale for this system, the analysis that was performed, and the methods that will be used to control the revenue per case and compare the relative charges of the hospitals.