Annual Penalties for Excess Readmissions Are Counterproductive, Study Says

Penalty burden greater in hospitals serving disadvantaged patients

The Hospital Readmissions Reduction Program (HRRP) initiated by the Patient Protection and Affordable Care Act levies financial penalties against hospitals with excess 30-day Medicare readmissions. In a new study, researchers at the University of Tennessee Health Science Center and Virginia Commonwealth University set out to understand the HRRP’s penalty burden during the program’s first five years, focusing on the characteristics of hospitals that received penalties during all of those years; how penalties changed over time; and the relationship between baseline and subsequent performance.

More than half of participating hospitals were penalized by the Centers for Medicare and Medicaid Services during all five years of the program. From fiscal years 2013 to 2017, the growth in average penalties was modest––doubling from 0.29% to 0.60%––despite increasing opportunities for penalization, the authors found. The penalty burden was greater in hospitals that were urban, major teaching, large, or for-profit and that treated larger shares of Medicare or socioeconomically disadvantaged patients.

Surprisingly, hospitals treating larger proportions of medically complex Medicare patients had a lower cumulative penalty burden compared with those treating fewer proportions of these patients, according to the study.

The authors also found that hospitals with high baseline penalties during the first year continued to receive significantly higher penalties during subsequent years.

In cases where hospitals often received penalties, the authors saw “a sizable financial impact on particular hospitals, limiting their ability to meet the needs of the populations they serve and [to] invest in quality improvement activities.”

The authors note that the 21st Century Cures Act allows the HRRP to adjust for patients’ socioeconomic status beginning in fiscal 2019, but the researchers suggest that policymakers should investigate other alternatives that could retain incentives for hospitals to reduce readmission rates without the counterproductive financial “side effects” of persistent penalization.

Sources: Health Affairs; May 2017; and FierceHealthcare; May 3, 2017.