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May 9, 2017

Penalties are climbing under CMS' Hospital Readmissions Program, study finds

Daily Briefing

The average penalty levied under CMS' Hospital Readmissions Reduction Program (HRRP) grew modestly from 0.29 percent to 0.60 percent during the program's first five years, despite the program's expansion and maximum penalty increases, according to a Health Affairs study published last week.

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About HRRP

HRRP, which was created under the Affordable Care Act, launched in fiscal year (FY) 2013. The program aims to reduce the number of patients who are readmitted to the hospital within 30 days of initial discharge for several conditions by imposing a financial penalty on those with higher-than-expected 30 day Medicare readmission rates.

In the program's first year, FY 2013, CMS withheld up to 1 percent of hospitals' regular reimbursements based on readmissions for three medical conditions:

  • Heart attack;
  • Heart failure; and
  • Pneumonia.

Since then, the program has expanded to include readmissions for chronic obstructive pulmonary disease, coronary artery bypass graft surgery, or total hip and knee arthroplasty, and the maximum penalty rose to 2 percent in FY 2014, and 3 percent in FY 2015 and beyond.

Study details

For the study, researchers sought to determine how many hospitals received penalties during the program's first five years, as well as the characteristics of penalized hospitals, and how penalties changed over time.

To do so, researchers from the University of Tennessee and Virginia Commonwealth University linked publicly available data on HRRP penalties for FY 2013 through FY 2017 to hospital characteristics from the American Hospital Association's (AHA) 2009 survey and CMS data. The final data sample included 3,229 hospitals.

Key findings

The researchers found, 1,692—or 52.4 percent—of the participating hospitals received a penalty every year during the study period. Only 354 hospitals, or 11 percent, never received an HRRP penalty.

The researchers noted that the growth in average penalties was modest—doubling from 0.29 percent to 0.60 percent, "despite the fact that the progressive expansion of the HRRP created additional opportunities for hospitals to receive higher penalties by adding three conditions and increasing the maximum allowable penalty from 1 percent to 3 percent."

According to the study, the penalty burden was greater for certain hospitals, including those that are:

  • For-profit;
  • Large; or
  • Major teaching hospitals;
  • Treat larger shares of Medicare or socioeconomically disadvantaged patients; and
  • Urban.

However, the researchers said hospitals with larger populations of "medically complex Medicare patients had a lower cumulative penalty burden" compared with those treating fewer such patients.

In addition, when examining the relationship between baseline performance and performance in subsequent years, the researchers found that hospitals with high baseline penalties continued to receive significantly high penalties in subsequent years.


The researchers concluded that HRRP leads to persistent penalization that limits the capacity for hospitals to reduce penalty burden. They suggested that "alternative structures" could help hospitals avoid frequent penalizations, while still encouraging hospitals to reduce readmissions (AHA News, 5/1; Thompson et al., Health Affairs, 5/1).

Get your readmission reduction toolkit

Reducing your hospital's readmission rates can seem like an overwhelming task—but it doesn't have to be.

Knowing where to focus is half the battle. We've found that the best strategies target four stages of care with significant potential to influence patient outcomes. The other half is knowing what improvements to make.

That's where our Readmission Reduction Toolkit comes in. We've compiled resources from across Advisory Board that will help you isolate and correct patient and systemic issues in the four critical stages of care:

  Stage 1:  Transition planning during the inpatient stay

  Stage 2:  Discharge education

  Stage 3:  Post-acute care coordination

  Stage 4:  Transitional care support

Get the toolkit now

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