Admissions about readmissions

The ever-thoughtful Brad Flansbaum presents a cogent summary of what we have learned and not learned about the causes of readmissions and the cost and benefits of reducing them.  I'll summarize briefly but then turn to the ramifications for a new generation of companies that have been created to capitalize on the current readmissions fad. First, here are some excerpts from Brad's post:

Think of the drunk looking for his lost car keys under the only light post in a parking lot.  As unlikely as he might find the keys, he does use logic in his approach despite his low odds of success.

We use readmits for the same reason.  We have mediocre tools to assess outcomes, but nothing better exists.  We use readmissions because we do not have much else to employ.

If one could equate a hospital stay to a restaurant experience, readmits as part of our composite grade would rank somewhere between arranging the table china and the linen choice.

Yes, as a country, we have improved—readmits have dropped 1-2% in absolute terms the last few years.  However, we do not know precisely why, nor have confidence in what interventions we have implemented to make the strides.  

Preventable readmits do not factor much into our large health care price tag.  It is also hard to claim any positive externalities impacting other aspects of care from whatever practice changes we have adopted, given we cannot reliably identify them.

The readmit metric has a long way to go—both on the knowledge discovery front and how we as practitioners should seek wisdom in a very crude measurement.  I am still amazed at how many non-clinicians find meaning in a measure so few clinicians view as high impact.

Brad also includes a list of what we actually know about readmissions.  I include a few:

1.  Not one intervention has magic bullet status.  Most studies indicate success involves the interplay of many items, often involving people outside the hospital in the community.
2.  Medication reconciliation, patient education, family involvement, and follow-up appointments matter—but not to everyone and we do not know if we should apply them to each patient or use them selectively.
5.  Preventable readmissions remain a mystery as a percent of total readmissions.  Based on my read, the low could be 5% and the high could be as great as 20%.
6.  Most readmissions arise secondary to diagnoses unrelated to the initial one.
9.  Administrative claims data, as used by the readmission measure, correlate poorly with clinical data derived directly from medical records.

Now, let's turn to the world of commerce. I'm going to focus on one company, Dovetail, as an example.  It's not the only one, but it appears to me to be represent the attempt of investors to take advantage of the current policy with regard to financial penalties for above-average readmission rates.  The concept, at heart, is to employ pharmacists to make home visits to patients and monitor medication adherence and adjust drug usage in light of the patient's changing condition. (I'm sure the company would say that other parts of the regime are of importance, too, but my sense is that much is based on the home visit model.)

Is there anything wrong with this?  No, not clinically.  It certainly won't do any harm.  And no, not as a short term business strategy, i.e., marketing to hospitals who seek arrows in their readmissions quiver.  Especially when the hospitals can enter into contracts for such services rather than increasing their own staff count.

It is on this latter point that I suspect the business model is unsustainable.  If we review Brad's conclusions, we can see that there is no proven relationship between medication reconciliation and readmissions reductions.  As I understand it, Dovetail and others offer their service on a fee-for-service basis, i.e., so much per patient or interaction or whatever.   In the absence of rigorous direct correlations between interventions and results, hospitals will eventually make a financial judgment that the cost is not warranted compared to their other alternatives.

So, then we turn to the underlying business model of such companies.  Is their goal to have a long-term sustained business, or to exit by sale to other private equity investors?  If it is the former, the company will need to move to a fee based on risk-sharing, at which point their revenues will be more uncertain.  If it is the latter, the multiple used for the purchase price will be heavily discounted given the uncertainties set forth by Brad.  Why?  If, as Brad suggests, effectiveness cannot be demonstrated, hospitals will stop using the service altogether or will demand that prices be reduced to an unprofitable commodity level.

In short, this is a business model without a future. It offers a short-term fit for a psychological niche while hospital administrators flail for answers to the government's financial penalty program. As a sustainable part of the health care system, it is a nullity.  If it is proven to be an effective approach, hospitals will figure out that employing their own staff is more cost-effective than paying a price that includes an equity return to private businesses. 

Ironically, I'm told that many of the investors in these kinds of firms are actually doctors in hospitals.  Well, if so, that is a fact that speaks for itself.