SPRINGFIELD, MO-As all hospitals and health systems are keenly aware, the Patient Protection and Affordable Care Act requires them to reduce the number of patients readmitted into their facilities. Failure to reduce hospital readmissions can lead to serious financial penalties for what the federal government calls “above-average rates” of readmissions for certain “preventable” conditions covered by Medicare.

The new policy, dubbed the Hospital Readmissions Reduction Program, is overseen by the Centers for Medicare & Medicaid Services, the federal agency that administers Medicare, Medicaid and the State Children's Health Insurance Program.

The new program, which took effect Oct. 1, 2012, allows the federal government to withhold up to 1% of regular reimbursements for acute care hospitals that have what CMS considers to be too many 30-day readmissions for heart attack, heart failure and pneumonia patients.

One percent might not sound like much, but most of the country's hospitals have slim operating margins to begin with – often in the 2%range. That means the penalties can be significant. With this in mind, many providers are exploring viable ways to cut readmissions.

One such method is to provide post-acute or home care for patients who have left the hospital. With studies indicating that such care indeed reduces readmissions, many providers are pursuing the possibility of acquiring, partnering with or developing alliances with post-acute and home care providers. Healthcare developers are also getting into the act, including those who have long focused on medical office buildings.

A case in point is the $28 million, 60-bed Mercy Rehabilitation Hospital Springfield, now under development in Springfield, Mo. The two-story, 63,000 square foot rehab hospital is being developed and will be owned by Duke Realty Corp. It will be 100% leased and managed by Mercy Springfield Communities, a partnership of Mercy Hospital Springfield, other regional hospitals, and Nashville, TN-based Centerre Healthcare Corp., a developer and operator of rehab hospitals.

Though Duke Realty is best known for its MOB development and acquisitions, the Mercy Springfield project isn't its first foray into the post-acute space. The firm is putting the finishing touches on a $23 million, 60-bed rehab hospital near Community Hospital North in Indianapolis. That project is also being leased and operated by Centerre, this time in partnership with Community Health Network of Indianapolis.

“We have worked with both Mercy and Centerre on other successful projects, so we are very pleased to have the opportunity to partner with them again,” says Keith Konkoli, a senior VP with Indianapolis-based Duke Realty.

Construction of Mercy Rehabilitation Hospital Springfield began in April and completion is slated for early 2014. Plans call for the facility to provide inpatient rehab for patients recovering from strokes, brain or spinal cord injuries, amputations, complex orthopedic injuries, and other conditions. Mercy Hospital Springfield is part of the 32-hospital Chesterfield, MO-based Mercy system, the nation's sixth largest Catholic health system.

The architect is Nashville-based Earl Swensson Associates Inc. and the general contractor is McCarthy Building Cos. Inc. of St. Louis.

Murray W. Wolf is the Founder and Publisher of Healthcare Real Estate Insights™, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.