Hospitals follow economic incentives

by philg

“Hospital Discharges Rise at Lucrative Times” (Wall Street Journal, February 17, 2015) has a great chart showing how the American health care system follows economic incentives held out by the federal government. Hospitals can make nearly twice as much if patients are discharged one day over the Medicare threshold rather than one day under. This results in a huge spike in discharges on the magic day. (Click on “3” to see the best chart.)

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9 thoughts on “Hospitals follow economic incentives”

  1. I’m shocked, shocked to hear that hospitals respond to economic incentives.

    There once was a place where people were supposed to work for the benefit of all without regard to incentives – it was called the Soviet Union and it didn’t work out well.

    The solution is not to get rid of incentives but to better align the payment system with the goals that you are trying to achieve. This is not easy. For example, if you just pay hospitals by the day, they will keep patients there as long as possible if they have empty beds. If you pay them a flat amount per case, they will dump patients on the street ASAP.

  2. Medicare will pay for in-patient rehab after a hospitalization for a certain number of days, but only if the patient is making progress. A very elderly woman I know (with no money) made progress until the very day her Medicare benefits ended at which point she plateaued and had to be transferred to a nursing home.

  3. And, many hospital admissions are not justified.

    It surprises me that, as far as I know, nobody has mention this, a couple of years ago Hurricane Sandy closed three of the largest hospitals of NYC for months (NYU, Bellevue, and Coney Island). Was there a shortage of hospital beds? No. NYC hospitals generate their own admissions with their ERs.

    American hospitals employ armies of “coders” who prepare bills to maximize revenue, and physicians are “trained” to do the same.

  4. Anonymous –

    Medicare will pay for 21 days of rehab after the patient meets criteria for an inpatient admission of at least two midnights. If they’re not retrospectively approved for the two-midnight rule, they don’t qualify for rehab.

    If the patient isn’t deemed fit to return home after 21 days, they are usually sent to long-term care at a nursing home. In my community the nursing homes are also the rehab facilities, so that means they stay in the same place but we then call it nursing home instead of rehab.

    My suspicion is that your friend ran out of her 21 days of rehab and was transferred to the nursing home, which is standard across the country.

    Sam

  5. Sam,

    There are 3 possible scenarios:

    1) She stopped benefiting from the rehab before the 21 days (in which case she should have been transferred as soon as the Doctor’s realized this).

    2) At 21 days she needed more rehab (in which case the rehab facility should have kept her, provided the additional rehab she needed, and billed her), or

    3) She stopped benefiting from the rehab on the day her benefits ended (nice for the facility since it maximizes their billing and minimizes their financial risk).

    Funny how it ended up being option (3).

  6. I’m unbothered by corrupt hospitals as long as they are not too corrupt. Are they working the system and doubling the cost of healthcare or is this eating small percentage of the Medicare dollars.

    And there is a 4th option, the patient needed more rehab but couldn’t afford to pay the bill and stopped receiving treatment.

    Can’t read the article not being a subscriber.

  7. Brian – you can put the article title in google search , and then the first matched link should work. It’s strange, but it works!

  9. Brian,

    Definitely not your 4th option: I was POA and the hospital did not contact me to determine if she could self-pay or if family would guarantee payment.

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