When President Barack Obama signed into law the Patient Protection and Affordable Care Act two years ago, some hospitals overlooked certain provisions that did not take effect for a few years, several attorneys said.
One of those aspects — which imposes a Medicare reimbursement penalty on hospitals with higher-than-average re-admission rates — began Oct. 1. The penalty affects about 60 hospitals in the Chicago area.
"There's a lot of things (in the law) that have taken effect that preceded this and I think this was kind of a sleeper that people didn't really focus on until they realized how it was going to affect them," said Patricia S. Hofstra, a partner at Duane, Morris LLP who focuses on health law.
In the Chicago area, 12 hospitals will receive the maximum penalty — a 1 percent reduction in their Medicare reimbursements — based on their 30-day re-admission rates, says data compiled by Kaiser Health News, a nonprofit news organization covering health-care policy and politics.
"It's going to sting enough that hospitals will be motivated to change their behavior," Hofstra said. "But I haven't seen anything that indicates hospitals will go out of business as a result of it."
Many other local hospitals will also receive a reimbursement penalty, though at a lower rate than the maximum. The government based its reductions on hospital discharges and re-admissions between July 1, 2008, and June 30, 2011.
Fredric J. Entin, a shareholder at Polsinelli, Shughart P.C., whose firm represents about 30 local hospitals, said he advises his clients to develop better discharge procedures to ensure patients connect with their primary physician once they leave to reduce the chance of re-admission.
For example, one of his local clients explored the option of providing an outpatient visit soon after they discharge every patient, to ensure the patient followed up on his or her care plan.
"If in fact a significant number of re-admissions are preventable, then let's find a way to reduce those," he said. "It's good patient care and it saves money."
Entin said the re-admission penalty fits with the broader goal of the health-care law — to reduce Medicare costs by paying for results and outcomes rather than the volume of procedures.
However, both Entin and Hofstra said the penalty legislation contains flaws, such as unfairly penalizing hospitals that serve sicker or more disadvantaged populations.
"The fact of the matter is, teaching hospitals take on the more difficult cases," Entin said. "And just as a consequence of those being difficult cases, the patients are probably more likely in need of re-admission."
If the penalties become too burdensome, a class-action lawsuit against the federal government may become necessary to remove the penalty, said Dr. Herbert Sohn, a urologist at Chicago's Vanguard Weiss Memorial Hospital and an attorney who taught health law at The John Marshall Law School.
"As far as I'm concerned, it's bad," Sohn said. "It's bad because it doesn't take into account the individual patient and the problems they have."
Sohn serves on the Healthcare and Wellness Committee for the Chicagoland Chamber of Commerce and said he would advise hospitals to speak with their legislators.
Michael R. Callahan, a partner at Katten, Muchin, Rosenman LLP, said any sort of legal challenge against the penalties or the government's method for imposing them would become "an uphill battle."
"Are there possibilities of challenging the data? Maybe, but it's based on information reported to the (Centers for Medicare & Medicaid Services), so it's not likely there's much of a challenge there," said Callahan, who works in Katten's health-care practice group.
He said hospitals must examine their re-admission data and determine the cost of reducing it against the penalty cost for not doing so.
"This is simply another example of a number of initiatives we will see as the government starts putting more pressure on hospitals to improve quality and reduce unnecessary utilization," he said.
"Sometimes complications are unavoidable. But this means you can't send them out the door and hope for the best."