Hospital readmissions are problematic for patients and hospitals alike, with 3.8 million 30-day readmissions each year, costing $52.4 billion to treat and care for. Readmissions can be linked to the quality of care delivered, as well as poor patient outcomes, and some readmissions are completely preventable. Quality, patient outcomes, and costs all receive the attention of hospitals and health systems – and the Centers for Medicare & Medicaid Services (CMS).
The Hospital Readmission Reduction Program (HRRP)
CMS is the largest payer for healthcare in the United States, and therefore, heavily vested in reducing hospital readmissions to improve patient outcomes and control costs. Established by Congress in 2010 as part of the Patient Protection and Affordable Care Act, the HRRP is designed to financially penalize hospitals for high rates of Medicare readmissions and encourage improved care coordination and discharge plans to reduce avoidable readmissions. Most acute care hospitals are subject to HRRP, with exempt hospitals including psychiatric, rehabilitation, long-term care, children’s, cancer, critical access, and all hospitals in Maryland. CMS uses HRRP, Hospital Value-Based Purchasing (VBP), and Hospital-Acquired Condition (HAC) Reduction Programs to measure and improve care.
Hospitals are penalized under HRRP with a reduction in payments to their Medicare admissions. This reduction applies to all of their Medicare admissions and is not limited to those that resulted in a patient readmission. Hospitals are penalized when their 30-day readmission rates are high in comparison to other facilities for six targeted conditions. CMS looks at a three-year period of data for each hospital across the six targeted conditions and makes adjustments for demographic factors. Each hospital’s average readmission rate is then compared to other hospitals to calculate an excess readmission ratio (ERR). The ERR determines the rate at which subject hospitals will be penalized.
Six Targeted Conditions
- Acute Myocardial Infraction (AMI)
- Heart Failure
- Pneumonia
- Chronic Obstructive Pulmonary Disease (COPD)
- Coronary Artery Bypass Graft (CABG) Surgery
- Total Hip And/or Total Knee Arthroplasty (THA/TKA)
CMS made some adjustments regarding hospital readmission numbers under HRRP to account for the COVID-19 Public Health Emergency. The three-year performance period for FY 2022 through FY 2024 excludes data from December 2019 through June 2020. The targeted condition of pneumonia was also excluded for FY 2023 payment reduction calculations as COVID-19 extensively impacted this measure.
Hospital penalties & costs in 2023
In fiscal year 2023, 3,043 hospitals were subject to HRRP, with 2,273 or 74.7% of those hospitals being penalized. Those penalties amounted to $320 million from October 2022 through September 2023, with an average payment reduction of .43%. 770 hospitals received no HRRP penalty, while 17 hospitals had the full 3% reduction penalty.
Hospitals can make improvements across the six targeted conditions to reduce or eliminate an HRRP penalty. Because it is a three-year performance period, it is difficult to know which performance improvements or readmission reduction strategies are working and will prevent future financial penalties.
Technology solutions for HRRP compliance
Hospitals can take advantage of technology that has been developed to emulate the HRRP and provide insights to help anticipate readmission penalties before the performance period has elapsed. By utilizing such tools, hospitals and health systems can identify problem cohorts and trends, allowing them to prioritize their hospital readmission reduction strategies for the clinical populations with the greatest risk for financial penalties tomorrow.
