Older Adults Placed at Healthcare Risks by Hospitals Seeking to Avoid Financial Readmissions Penalties

On October 2, 2012, the Centers for Medicare and Medicaid Services, through the Affordable Care Act Section 3025, began implementing policies to reduce hospital re-admissions by older adult Medicare beneficiaries. (1) 

What this means for older adults is that hospitals are financially penalized if there is a return to any hospital within 30 days of discharge for specific conditions. Surprise exists that hospitals have found a way around the readmission penalties placing the healthcare of older adults at risk.

Supporting Better Care for Older Adults

The case to support better healthcare for older adults with Medicare is both reasonable and practical. Older adults deserve quality care. Many have chronic health conditions that result in the need for ongoing attention. Older adults may be viewed by physicians as disposable due to age and chronic conditions.

Aging results in declines in many body systems and functions. The specific conditions related to readmission penalties include knee and hip replacements, heart attacks, heart failure, coronary artery bypass surgery, pneumonia, and chronic lung disease.

Financial Readmissions PenaltiesHow are older adults affected by these diagnoses? Arthritis, osteoarthritis, and past injuries result in stiff bodies making many physical movements including walking difficult. Falls occur and result in hip replacements. Knees are replaced due to years of wear and tear, osteoarthritis, and bone-on-bone pain.

Declines in heart function affect blood flow. High blood pressure is common. Poor circulation results in vascular disease that may translate to diagnoses of Alzheimer’s and dementia. Loss of feeling in the legs and feet results in making walking painful, resulting in balance issues, and falls. Foot wounds occur due to poor circulation. Strokes are common. Bypass surgery is necessary. Older adults further limit physical activity, and become homebound, isolated, depressed, and anxious.

Breathing becomes difficult as a result of respiratory diagnoses like asthma, bronchitis, and COPD. Swallowing problems result in food and liquid aspiration into the lungs. Pneumonia occurs frequently in older adults with breathing issues and is a leading cause of death.

The ability to digest and absorb food results in low weight. Decreased kidney function results in the body having difficulty removing toxins. A diagnosis of diabetes stresses kidney function. Frequent in older adults are urinary tract infections that may result in delusional behaviors and cognitive declines.

Aging Presents Healthcare Challenges

As my grandmother, Mary said, “it’s no good to get old.”The combination of chronic health conditions and low literacy places older adults at risk of receiving poor medical care. Low health literacy results in a variety of challenges affecting quality care for older adults.

These include locating health services like physicians, therapists, medical offices, labs, and diagnostic testing locations. Review of documents and completion of forms is an ongoing part of receiving medical care. Many older adults are unable to understand the information in the forms; meaning that forms are signed out of the desire to receive medical care with little understanding of the agreements made. Others have macular degeneration or glaucoma and are unable to read the forms.

The ability to report and share medical history with a physician or other medical provider may be difficult resulting in poor management of chronic disease. Asking questions about a diagnosis or the reason for being prescribed medication is a common fear of older adults who are embarrassed to ask healthcare questions. Understanding and following directions on prescription labels result in unnecessary hospitalizations because many older adults do not take medications as prescribed. Many simply do not have prescriptions filled.

Older adults with dementia or Alzheimer’s who arrive at the emergency room unaccompanied are unable to report why they were sent to the emergency room. Many are unable to report pain.

Unless an advocate familiar with the health history of the older adult is present or available by telephone, necessary care may not be received. The act of being hospitalized for an older adult with dementia or Alzheimer’s may be traumatic because of being alone in a strange place. Testing for obvious concerns occurs and the older adult is quickly returned home.

Repeat Observation Visits Instead of Being Admitted

A Kaiser Health News report explains the difference between hospital stays for observation and admittance. (2)The simple explanation is that placing patients on observation avoids a formal admission. Avoiding an admission avoids financial rehospitalization penalties for patients returning to any hospital within 30 days of discharge.

It’s no surprise that hospitals found a legitimate way to avoid being financially penalized by refusing to admit older adult Medicare beneficiaries. Based on my experience as a caregiving advocate and fiduciary, hospital staff does not offer information about care status whether admitted or on observation. The information is only offered if one knows to ask.

Hospital staff avoid discussing the subject. As a care advocate—with the fiduciary responsibility of a guardian or medical power of attorney—a hospital placing one of my clients on observation resulted in opposition. I consistently advocated having my clients admitted so that they could receive real medical care and follow-up rehabilitation services if necessary. I won some battles and lost others.

Hospital staff telling an older adult that he or she is admitted on observation means nothing. Without an explanation quantified in insurance dollars and the inability to receive follow-up care, an older adult would not know to disagree. The older adult does not know what questions to ask. Most would not know how to disagree with observation status.

Older adults and family members lack the skills to advocate. Health literacy, meaning understanding terminology, recommendations, and coordinating care may not be familiar territory for family caregivers. Many older adults and family members fear retribution from hospital care staff for complaints that may then result in poor care so they say nothing.

As a result, the healthcare of older adults is compromised. Observation status eliminates the potential for follow-up care in a skilled nursing community for rehabilitation. Costs covered when admitted to the hospital may not be covered by an observation stay.

Older Adult Healthcare Placed at Risk by Rehospitalization Penalties

Since the initiation of the CMS, Centers for Medicare and Medicaid, and re-hospitalization penalties, my ability as a care advocate to have clients admitted to the hospital became significantly more difficult. Hospitals in the Denver Metro area have re-modeled to build entire observation units to house patients considered temporary. Being placed on a unit that appears similar to an “admitted unit” gives the appearance that the patient is admitted because he or she is not in the emergency room. This presents the sleight of hand trick of “don’t ask – don’t tell.”

The goal of hospitals is to admit, treat, and release as soon as possible, often within a matter of hours. Many times, before I was able to speak to hospital staff to receive a health update, my client was returned home.  In cases where a chronic condition may worsen, the ignored condition results in a repeat trip to the hospital the next day.

The statistics show that the intention of the rehospitalization penalties has penalized older adults. The result is poor care and repeat hospitalizations. Hospitals outsmarted and outwitted the system through a smoke and mirrors process of building observation units. However, results indicate that placing patients on observation may not reduce rehospitalizations.

How did the government and CMS, the Centers for Medicare and Medicaid, not consider the potential pitfalls? Those of us working in healthcare at the time the act was issued could have predicted the future. Hospitals found a way around the financial penalty.

According to a report by McKnight’s Long-Term Care, “while inpatient readmissions dropped by 2.3% during the study period, the researchers found the rate of readmission after an observation stay increased by 3.8%. Many patients also returned for repeat observation stays. Hospitals face no repercussions for unsafe or poorly handled discharges from observation care that may lead to repeat hospitalizations.” (3) It is the older adult and family caregivers who suffer from poor care and discharges.

In my interactions with emergency room and hospital nurses, some are ignored when they express concern to attending physicians about a patient being discharged. I have argued with physicians, directors of case management, and discharge planning about the risks of releasing clients. Some are more empathetic than others. The hospital staff has reported me to adult protective services for disagreeing about care and returning a client safely home.

A recent situation illustrating this concern occurred with a client who had been hospitalized and treated for a number of chronic health conditions including a recent hip fracture. His release was planned for a Friday afternoon. The inside industry story known by healthcare professionals is that hospitals prefer to discharge patients on Fridays and will do almost anything to make this happen.

My discussion with the floor nurse was that she had concerns about my client specific to chest congestion and gurgling sounds. The nurse was concerned that my client may have pneumonia. True to form, the doctor would not allow another overnight stay.

The doctor signed the discharge paperwork to return my client to his nursing home. An order for antibiotics was provided. The next day the client had a worrisome decline in health and was low on oxygen struggling to breathe. He was returned to the hospital and diagnosed with pneumonia. He remained to receive IV antibiotics and was discharged when stable.

What Happens When Admission Occurs and Discharge is to a Skilled Nursing Facility?

The same rule applies now applies to skilled nursing facilities regarding the 30-day hospital readmission. Two responses by skilled nursing facilities have occurred.

The first response is that hospitals are working to establish lists of preferred provider networks for skilled nursing facilities. This means that the hospital may recommend their skilled facility of choice instead of promoting patient choice by providing skilled nursing facility alternatives. The patient may agree and trust that the hospital is making a recommendation in the best interest of the patient. What the patient doesn’t know is that the hospital is deciding in the best interest of their pocketbook.

The goal of the hospital, by referring a large number of clients to a preferred skilled nursing facility, is that the facility will do everything in its power to avoid returning the client to the emergency room. This may be detrimental to the client if a return to the hospital is needed and hesitation occurs.

The question must also be posed whether there are financial incentives or other rewards exchanged between the hospital and the skilled nursing facility. This is a common practice in the healthcare industry.

The second response is that effective in 2018, “skilled nursing facilities like acute care hospitals will be subject to a penalty of up to 2% of their Medicare reimbursement for posting higher-than-average rates of hospital readmissions.” (4)  The hope is that physicians, called hospitalists, will coordinate care at the skilled nursing facilities to avoid CMS rehospitalization penalties.

An article in Health Leaders Media posed the question, “are hospitals gaming the system? The response was that hospitals are not purposely and malevolently gaming the system. It’s just a confluence of events and these are the implications.” (5) As a result of the penalties, the proof is that hospitals feel financially pressured to place more patients in observation.

Advocacy is Required by Older Adults and Family Caregivers

For many family caregivers and older adults, the CMS Centers for Medicare and Medicaid rehospitalization act is unfamiliar territory. While the act is viewed as necessary and beneficial due to spiraling healthcare costs of the entitlement programs, Medicare and Medicaid, consumer advocacy is critical.

Disputes occur about taking advantage of our elderly population by reducing budgets for Medicare and Medicaid. The taking advantage has already occurred through excessive charges by the healthcare system. The Affordable Care Act exists to bring spending under control. Much like anyone who would not want their paycheck reduced, gaming the system and smoke and mirror presentations will continue to occur by hospitals and healthcare providers affected by the Affordable Care Act.

Most important is transparency to all consumers, especially older adult Medicare beneficiaries, by hospitals, skilled nursing communities, and hospitalists. Each should be required to disclose and request signatures on notices defining observation care, details about preferred provider relationships, and relationships between hospitals, skilled nursing communities, and hospitalists.

Healthcare providers should also be required to disclose if money or other favors are exchanged for referrals. These actions would allow consumers to make informed decisions rather than allowing the healthcare industry to hide behind a veil of deception. When in doubt, older adults and family caregivers in doubt should be directed to retain a caregiving advocate not associated with the hospital or skilled nursing facility system.


(1) Centers for Medicare and Medicaid (CMS). “Readmissions Reduction Program (HRRP),” Accessed October 3, 2018, https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps/readmissions-reduction-program.html

(2) Jaffe, Susan. “FAQ Hospital Observation Care Can Be Costly for Medicare Patients,” Kaiser Health News, 8/29/16. Accessed October 3, 2018, https://khn.org/news/observation-care-faq/

(3) Berklan, James M. “Lower Readmission Rates May Be Offset by Observation Days,” McKnight’s Long-Term Care News. July 2018, p. 4.

(4) Beresford, Larry. “How Will SNF Readmission Penalties Affect Hospitalists?” The Hospitalist, 12/19/17. Accessed 10/3/18 https://www.the-hospitalist.org/hospitalist/article/154817/transitions-care/how-will-snf-readmissions-penalties-affect-hospitalists

(5) Commons, John. “Readmissions are Down Unless You Consider Observation Stays.” Health Leaders Media, 5/31/18. Accessed 10/3/18 https://www.healthleadersmedia.com/clinical-care/readmissions-are-down-unless-you-consider-rise-observation-stays

© 2018 Pamela D. Wilson, All Rights Reserved.

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