More than 2,000 hospitals, including some in Maine and some that are nationally recognized, will be penalized by the government starting in October because too many of their patients are readmitted soon after discharge, new records show.

Together, these hospitals will forfeit about $280 million in Medicare funds over the next year as the government begins a wide-ranging push to start paying health care providers based on the quality of care they provide.

In Maine, 10 hospitals will be penalized. They are: Penobscot Bay Medical Center in Rockport, Mercy Hospital in Portland, Franklin Memorial Hospital in Farmington, Goodall Hospital in Sanford, Maine Coast Memorial Hospital in Ellsworth, MaineGeneral Medical Center in Augusta, St. Mary’s Regional Medical Center in Lewiston, York Hospital in York, and Brunswick’s Mid Coast Hospital and Parkview Adventist Medical Center.

The government’s penalties are based on the frequency that Medicare heart failure, heart attack and pneumonia patients were readmitted within 30 days between July 2008 and June 2011. Medicare took into account the sickness of the patients when calculating whether the rates were higher than those of the average hospital, but not their racial or socio-economic background.

Penalties vary based on the hospital’s readmission rates and are currently capped at 1 percent. The penalty will be deducted from reimbursements each time a hospital submits a claim starting Oct. 1. For example, if a hospital received the maximum penalty of 1 percent and it submitted a claim for $20,000 for a stay, Medicare would reimburse it $19,800.

St. Mary’s penalty will be .02 percent. Officials there estimate it will cost them about $26,000 of their $13.4 million annual Medicare reimbursement. 

Franklin Memorial Hospital’s penalty will be .16 percent. Gerald Cayer, executive vice president of the Franklin Community Health Network, which runs Farmington’s Franklin Memorial Hospital, believes that will work out to about $12 less per Medicare patient. He was uncertain whether the penalty would affect all Medicare patients or only those treated for heart failure, heart attack and pneumonia, the three categories Medicare looked at when considering readmission rates.   

About 37 percent of Franklin Memorial’s patients are on Medicare. 

With nearly one in five of all Medicare patients returning to hospitals within a month of discharge, the government considers readmissions a prime symptom of an overly expensive and uncoordinated health system. Hospitals have had little financial incentive to ensure patients get the care they need once they leave, and in fact they benefit financially when patients don’t recover and return for more treatment.

Nearly 2 million Medicare beneficiaries are readmitted within 30 days of release each year, costing Medicare $17.5 billion in additional hospital bills. The national average readmission rate has remained steady at slightly above 19 percent for several years, even as many hospitals have worked harder to lower theirs.

Cayer was surprised to learn Monday that Franklin Memorial was on the list of the penalized. He said his hospital’s overall readmission rate hovers between 4 and 9 percent, far less than the 19 percent national average. And the hospital was under the readmission cap in two of Medicare’s three categories — heart failure and pneumonia — and only missed the cutoff for heart attack readmission by four patients over that three-year period.

“(Readmissions) are something our medical staff has been very attentive to, our quality folks have been very attentive to,” he said. He added that in the past year-and-a-half the hospital has focused particular attention on follow-up care and ensuring patients understand their medication needs.

Like Franklin Memorial, St. Mary’s also missed the readmission cutoff in one of the three categories. That one category was “slightly above,” officials there said.

And like Franklin, St. Mary’s has been working on lowering readmission rates across the board by making sure patients understand their medication needs and discharge instructions and have follow-up care.

However, unlike Cayer at Franklin, St. Mary’s officials weren’t surprised they had landed on Medicare’s list of penalized hospitals. They knew in June that their readmission rate in one category was slightly above Medicare’s cutoff, and they knew penalties were coming. 

“I think more than anything it’s just a reminder of how hard we need to work to prevent those readmissions,” Betsey Shew, St. Mary’s director of performance improvement, said. “To me it’s a reminder of the fact that we need to continue to focus our efforts on it and improving that care continuum to keep folks out of the hospital.”

The penalties, authorized by the 2010 health care law, are part of a multipronged effort by Medicare to use its financial muscle to force improvements in hospital quality. In a few months, hospitals also will be penalized or rewarded based on how well they adhere to basic standards of care and how patients rated their experiences. Overall, Medicare has decided to penalize around two-thirds of the hospitals whose readmission rates it evaluated, the records show.

The penalties will fall heaviest on hospitals in New Jersey, New York, the District of Columbia, Arkansas, Kentucky, Mississippi, Illinois and Massachusetts, a Kaiser Health News analysis of the records shows. Hospitals that treat the most low-income patients will be hit particularly hard.

The maximum penalty will increase after this year, to 2 percent of regular payments starting in October 2013 and then to 3 percent the following year. This year, the $280 million in penalties comprise about 0.3 percent of the total amount hospitals are paid by Medicare.

Some safety-net hospitals that treat large numbers of low-income patients tend to have higher readmission rates, which the hospitals attribute to the lack of access to doctors and medication these patients often experience after discharge. The analysis of the penalties shows that 76 percent of the hospitals that have a lot of low-income patients will lose Medicare funds in the fiscal year starting in October. Only 55 percent of the hospitals treating few poor patients are going to be penalized, the analysis shows.

The Bangor Daily News contributed additional Kaiser Health News data to this report.

Sun Journal Staff Writer Lindsay Tice contributed to this report.

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