November 1, 2012 – Under penalties mandated by the recent federal health care law, eight local (San Diego) hospitals are getting lower Medicare payments for having higher-than-expected readmission rates. The Centers For Medicare & Medicaid Services issued a list of penalized hospital in late September that showed reductions in Medicare reimbursements for half of the 16 hospitals in San Diego County. Nationwide, 2,217 hospitals, or 63.4 percent, received penalties for having too many readmissions. A readmission occurs when a patient is readmitted to a hospital less than 30 days after being sent home. The penalties under the Affordable Care Act, which Congress passed in 2010, take effect for the first time this fall. Under the readmission reduction program, a hospital can lose a maximum of 1 percent of its annual Medicare reimbursement if its readmission rate is judged too high. Nationwide 307 hospitals received the maximum 1 percent penalty, but no local hospitals were on that list. Locally, penalties ranged from 0.42 percent to 0.02 percent.
I ran the numbers and Sharp Healthcare (A2 / 00037CSJ0) is the only tax-exempt borrower with any measurable negative impact resulting from this penalty; and it’s de minimis. Sharp will take a system-wide hit of around $1.0 mln in net patient revenues. If it flows straight to the bottom line, it’s worth a whopping .03 points of debt service coverage (2011 pro-forma).
Not much of a readmission disincentive.