Government Penalties Pale in Comparison to Public Relations Woes

More than 2,000 hospitals were penalized by government regulators for high readmission rates last year. But it’s not just the money that matters.

When hospitals don’t get treatment right the first time, or when patients receive poor follow up care, they often end up right back in the hospital—and at a cost. The Affordable Care Act wants to change that. Under the law, hospitals with high instances of patient readmissions lose a share of their reimbursement. The idea is to improve patient care, outcomes, and, ultimately, save money.

The financial penalties are determined on a sliding scale—one percent of Medicare payments this year, which gradually ticks up to three percent in 2014. It’s a good chunk of change. Medicare expects to save about $26 billion a year, as fewer and fewer patients return to the hospital. But the money is only one part of the story—the hospital’s very reputation is at stake. And, ultimately, how the hospital is perceived in the neighborhood, among online message boards, or in the press may be an even more powerful motivator than financial penalties.

PwC’s Health Research Institute analyzed the number of times hospital readmissions were cited in publications. This analysis provides a good proxy for public awareness of readmission rates and penalties, and it allows comparisons between hospitals. After a six-month review of newspapers, journals, and articles, we found that media-mentions increased a whopping 94 percent between 2012 and 2013. What kind of articles were these? Many were written after CMS released their list of penalized hospitals—and more often than not the coverage focused on comparing one hospital to another in the same community.

Consumer groups such as the Consumer Union now use readmission data as part of their overall hospital safety scores. According to a 2012 HRI survey, 43 percent of consumers who read reviews used Consumer Reports magazine to inform their healthcare decisions, and nearly 7 percent said they planned to change hospitals after seeing published safety scores.

The magazine’s advice on health services is similar to its advice on choosing a television set or stereo speakers—do the research, review the data, and pick a product that is both high in quality and safety. A hospital’s reputation is a powerful motivator when it comes to choosing a healthcare setting. After all, who wants a family member treated at a hospital with the highest readmission rate? When given a choice, consumers often vote with their feet.

Government regulators and the media are not the only organizations using this new data to inform consumers—hospitals themselves are spreading the word. This is new territory for most medical centers, which for years pegged their marketing campaigns to popular rankings such as those published in US News and World Report. Increasingly, hospitals are touting their low readmission rates—as well as other quality indicators—to try to win over new customers.

Healthcare is undergoing a fundamental shift because payments are now being adjusted to not just reflect the quality of care, but also how the patient perceives that quality. Last year, close to $850 million in hospital Medicare payments were based on the patient’s experience. Medicare insurers will have more than $5 billion in payments at risk through 2014.

Clearly, quality and safety now mean a lot for the bottom line. But at a time when more and more individuals will gain insurance coverage—and in this age of instant access to information—a hospital’s reputation plays an equally important role. Leading indicators show that the media and consumer groups are keeping a watchful eye on these scores, which means consumers are not far behind.

Benjamin Isgur is a director in the PwC Health Research Institute.

Posted in Expert Opinions, Hospitals.