Background: Hospitals are incentivized to reduce 30-day readmissions under the Affordable Care Act. Medicare payments can be reduced when inpatient readmissions are excessive. The Centers for Medicare & Medicaid Services (CMS) readmission measure is defined among encounters classified with only an inpatient status. At this time, observation encounters are not included in this measure. This CMS readmission definition falls short of being an outcome that is patient-centered. Regardless, the CMS definition may soon evolve as bundled payments are also under consideration by CMS to assign payments for an episode of care that includes multiple services over a defined period of time. With these bundled payments, outpatient observation and inpatient encounters could comprise a single episode of care. Measuring and reporting readmission rates that utilize both encounter types is an essential step in preparation for bundled payments and is a move towards using a more patient-centric outcome.

Methods: This assessment is within a large healthcare system comprised of 30 facilities, owned and managed, across three states between January 2015 and July 2016. Identification of encounters were made through the various billing systems. A patient-centric readmission is defined as an inpatient or outpatient observation stay to any owned or managed facility within 30-days of the index encounter. An inpatient rehabilitation classification, a planned encounter as defined by CMS, and a facility transfer are excluded as a readmission encounter. Data are presented by facilities that are owned and managed.

Results: The median difference between the CMS and the patient-centric readmission rates for index encounters at owned and managed facilities is 2.3% and 1.6% respectively. The difference by month is statistically significant among both owned (p<0.001) and managed facilities (p<0.001).

Conclusions: The current CMS readmission measure underestimates readmissions as viewed either from a patient’s vantage point or in the future bundled payment model environment. The increased readmission rates are seen across both owned and managed facilities. Healthcare systems should use these results to begin planning for eventual modifications to payment structures, and research into innovations to prevent readmissions should adopt this more comprehensive, patient-centric definition.