Financing and Reimbursement Methods Introduction Hospital readmissions represent a considerable expense. Innovative care delivery models such as value-based reimbursement, accountable care organizations, and patient-centered medical homes are designed to lower the cost of integrated care delivery and reduce hospital readmission rates. From a historical perspective, the primary organizational and economic structure of health care has been reimbursement on a fee-for-service basis (Executive Office of the President’s Council of Advisors on Science and Technology, 2010). Government sponsored insurance coverage, such as Medicare and Medicaid, are distinguished from other types of third-party payers due to their reimbursement model and contractual service level agreements. For example, the revenue generated by third-party payers in health care organizations is known as the payer mix (Baker & Baker, 2013). Many types of management reporting are arranged by the payer mix (the revenue source) and identifies the proportion of revenues realized from each of the different types of payers (Baker & Baker, 2013). Case Report Financing of the U.S. health system undergirds, supports, and provides a solid foundation for delivery of integrated health care services. For example, the readmission of patients with the same conditions or who have acquired a hospital-based infection or disease within 30 days of release were among the high rates for health plans and third-party payers. (Zimmerman, 2017). As a result, the Centers for Medicare and Medicaid Services (CMS) have eliminated reimbursements for readmissions that occur less than 30 calendar days after discharge. Since Gerhardt et al. (2013) points out that readmission rates were also lower at hospitals participating in pay-for-performance (P4P) programs. P4P programs compensate providers financially for performance-based measures, such as the number of medical procedures they perform or the number of diagnostic test orders. However, P4P and other types of performance-based programs have been phased out in recent years in favor of physician compensation based on positive health outcomes for patients in the 30 days following hospital or care discharge (Rappleye, 2017). Conclusion Despite the best efforts of third-party payers such as CMS to reduce costs by lowering readmittance rates, the policies and their implementation have been far from perfect, and in some cases fragmented or haphazard at best. Today, the focus for CMS is on value-adding activities to maximize the value of the health system as a learning organization and support the cost-containment efforts such as integrated delivery systems. The reimbursement revenue function for health care organizations is to remain financially solvent and critical to operation in the modern environment of value-based reimbursement (Getzen, 2013). Questions implementation of the updated reimbursement model, the readmittance rates for Medicare and Medicaid patients fell from 21.5% in 2007 to 17.8% in 2015 (Zimmerman, 2017). However, Socioeconomic factors are a leading cause of higher readmission rates in safety-net hospitals, which have a vital role in treating underserved and vulnerable populations. CMS officials must be cognizant of the unintended effects of penalty programs on these institutions. Additionally, these safety-net hospitals are often in urban areas and are either teaching or large- or medium-sized for-profit hospitals that are more likely to have a higher proportion of patients of low socioeconomic status. 

1. Explain why hospitals readmissions are so costly for health systems or third-party payers. Explain your answer from the perspective of the three major stakeholders— providers, patients, and payers—and your analysis of the current reimbursement environment. 

2. Identify and analyze one of the leading causes of hospital readmissions over the past 5 years. In your opinion, outline how each of the three major stakeholders can implement a process or procedure to reduce their contribution to the readmission cycle.