Report Establishes Benchmarks for Reducing Avoidable Hospitalizations for Medicare Beneficiaries

A new analysis comparing a group of Medicare Advantage plans to traditional fee-for-service Medicare quantifies how coordinating and integrating care can lower the rate of avoidable hospital readmissions (a hospital admission within 30 days following a patient’s hospital discharge), as well as preventable hospital admissions and emergency department (ED) visits. The report, authored by Johns Hopkins University researcher Gerard Anderson, PhD, and commissioned by the Alliance of Community Health Plans (ACHP), documented that it is possible to improve quality and lower costs in the Medicare program if the delivery system is structured to support coordinated care.

Dr. Anderson found that the average readmission rate for the 13 ACHP member plans analyzed in the report was 27 percent lower than traditional Medicare’s national average. Further, preventable hospital admissions and ED visits were about 85 percent lower in the ACHP plans when compared to the national average of traditional Medicare. (Preventable or so-called “Ambulatory Care Sensitive Conditions” are those which could have been prevented had the patient received good primary care and related services. These include conditions such as pneumonia, coronary artery disease, asthma, and diabetes.)

“ACHP commissioned this report in response to issues raised by Congress, the Administration and the Medicare Payment Advisory Commission (MedPAC),” said Patricia Smith, President and CEO of ACHP. “There is a broadly shared concern that hospitalization rates are too high and that a lack of coordination is the cause. Our goal for this report is to provide guideposts for Congress as they write health reform legislation, and to work in partnership to establish sensible market incentives that will lead to coordinated, integrated care as well as actively engaged patients.”

The regional, community-based health plans that are ACHP members are able to lower the rate of avoidable hospital admissions because they invest in delivering the kind of coordinated,

patient-centered medical care that traditional fee-for-service Medicare – in its current state – cannot consistently provide.

John Hogan, President and CEO of Capital Health Plan in Tallahassee and Chair of the ACHP Board of Directors, noted, “Patients expect the health system to work with them and their doctors to help them stay healthy and avoid hospitalization and emergency care whenever possible. But in our current, fragmented health care system, where reimbursement predominantly rewards volume of services over outcomes, there is less incentive to focus on the longer term view of a patient’s health. Providing for the long term needs of patients, particularly those with chronic illness, requires an organized, coordinated delivery system with an emphasis on patient education and affordable access to valuable care. Health care reform should strongly encourage value-based purchasing and set an example for all of Medicare by recognizing and rewarding the high performance being achieved by many Medicare Advantage plans.”

Hogan added, “At Capital Health Plan, effective primary care is the foundation of our program. All of our Medicare members are established with a primary care physician of their choosing and the health plan supports these relationships with information, coverage, services, and a reward system that promotes continuity of care and high quality outcomes.”

“This report tells us that significant gains could be made in Medicare that would improve patient care, provided that the right incentives are in place,” said Len Nichols, PhD, Director of the Health Policy Program at the New America Foundation. “Policymakers should take notice of this and other studies that demonstrate what’s already working in some health care plans. It’s time to move away from the current fee-for-service payment system toward one that emphasizes value rather than volume, enhances the value of primary care, and holds providers accountable for quality and efficiency.”

Dr. Gerard Anderson concludes the report by saying that if the Medicare fee-for-service program had similar rates of readmissions and preventable hospitalizations and ED visits as the Medicare Advantage plans offered by ACHP members, the Medicare program would save approximately $10 billion.

Study Highlights

  • Medicare fee-for-service’s average hospital readmission rate (30 days post-discharge) for the country in 2007 was 18.6 percent. The average readmission rate across ACHP plans was 13.6 percent – 27 percent less than traditional Medicare’s national average. Hospital readmissions cost Medicare $17.4 billion in 2004.
  • The Medicare fee-for-service rate of preventable emergency department visits was 15.5 visits per 100 beneficiary months in 2007. The average rate across ACHP plans was 2.2 visits per 100 beneficiary months – 86 percent lower than Medicare’s national average.
  •  The Medicare fee-for-service rate of preventable inpatient admissions per 100 beneficiary months was 19.0 in 2007. The average rate across ACHP plans was 2.5 per 100 beneficiary months – 87 percent lower than Medicare’s national fee-for-service average.

About ACHP

ACHP is a membership organization of 19 non-profit, community-based and regional health plans and provider organizations from across the country providing coverage and care for approximately 18 million Americans. These health plans focus on improving the health of the communities they serve through integrated and coordinated care delivery. They are on the leading edge of patient care coordination, patient-centered medical homes, accountable health care delivery, use of information technology, and other innovations leading to improvements in administrative efficiency and the quality of care. They maintain strong community ties and close plan/physician partnerships. Almost all ACHP member plans participate in Medicare, most are in Medicaid, and most also offer coverage in the commercial market. To learn more about ACHP, go to