Crime and Punishment: A Modern Saga

January 2015

In Dostoyevsky’s nineteenth century novel Crime and Punishment, the main character is a broken and destitute individual who plots the murder of a disreputable pawn broker deemed to have accumulated considerable wealth. The criminal act is justified because of the greater good that can be achieved with the money that is to be taken by the assailant. The crime is completed. It is accompanied by unanticipated consequences (murder of the pawn broker’s half-sister). The amount of money from the crime is far less than anticipated. The murderer ends up doing time in Siberia.

The Centers for Medicare and Medicaid Services (CMS) have now become the protagonist of a modern-day version of Crime and Punishment. Over 2,600 hospitals have been fined in October 2014 for excessive readmissions. With more than 1,400 hospitals having an exempt status from the readmission penalties, this means that two-thirds of at-risk acute care hospitals have not met the arbitrary standard of CMS and will be subject to the fines! On December 18, it was announced that over 700 hospitals will receive reductions in CMSpayments for 2015 under the federal “Never Events” program. Some of these events should not occur in the course of optimal clinical practice. Unfortunately, they do occur and should not be labelled as “never events.”[1] These CMS actions are occurring at a point in time when Thomson Reuters© is projecting continued stress on the operating margins of hospitals from rising costs and declining reimbursement for 2015.[2] The fabrication of crimes and inflicting of punishment under the current methods employed by CMS will have limited benefits and may well have a destabilizing effect upon hospital operations.

The goal of improved cost-effective care is desired by all stakeholders in health care. The goal can be achieved by the realignment of hospital and physician incentives in the provision of care. The redesign of inpatient payment to an episode-based, or “bundled” strategy has the prospect of achieving this goal. A fair and complete price for the bundle rewards cost-effective care, and penalizes suboptimal care that has excessive complications and costs. Included in the bundled price would be the risk of inpatient and post-discharge events (e.g., readmission). This payment design avoids arbitrary and draconian assignment of fines based upon perceptions of government bureaucrats. Like consumers buying an automobile, the price reflects the core episode of care plus events that follow a defined period (30, 60, or 90 days) after discharge. Hence, “never events” and readmissions are folded into the price. Hospitals and clinicians will then have positive targets to achieve in outcome performance and economic stewardship rather than taking a defensive posture in trying to avoid “never events” and readmissions that in fact occur in the hands of the very best providers of care.

[1] Fry DE, Pine M, Jones BL, Meimban RJ: Patient characteristics and the occurrence of never events. Arch Surg 2010; 145:148-51.[2]


Donald Fry

Donald E. Fry, M.D. is Executive Vice President for Clinical Outcomes Management at MPA Healthcare Solutions, Adjunct Professor of Surgery at Northwestern University, and Professor Emeritus of Surgery at the University of New Mexico School of Medicine. At MPA Healthcare Solutions, Dr. Fry provides clinical leadership in analyzing and evaluating clinical performance, guiding quality improvement, and creating incentives for coordinated, cost-effective care.

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