The introduction of the CMS Hospital Readmissions Reduction Program (HRRP) in October 2012 thrust readmission reduction into the mind of every health executive.
Defining readmissions
Readmissions are defined by CMS as an admission to a participating hospital within 30 days of a discharge from the same or another hospital.
CMS tracks these six conditions and procedures as part of HRRP:
- Heart Failure (HF)
- Acute Myocardial Infarction (AMI)
- Coronary Artery Bypass Graft (CABG) Surgery
- Chronic Obstructive Pulmonary Disease (COPD)
- Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (THA/TKA)
- Pneumonia
Each of these conditions is vital for healthcare organizations to measure—falling behind on only one can still result in penalties.
How readmissions penalties are calculated
For FY 2020, CMS will be examining hospital data based on hospitals’ performances during a three-year period from July 1, 2015 through June 30, 2018.
The payment adjustment factor (PAF) is the reduction applied to CMS payments. It is calculated using an excess readmission ratio (ERR), which CMS calculates by looking at a hospital’s expected readmission rate (based on other similar hospitals) and comparing it to a hospital’s actual readmission rate.
Related article: Nine Ways to Reduce Hospital Readmissions from Hospital Executives
Hospitals that perform better than average will have an ERR less than 1.0 (and are not penalized), while hospitals performing worse than average will have an ERR of greater than 1.0 (and are penalized). The PAF is generated using ERR and a complicated formula. The minimum PAF is 0.97 (which would account for a 3% penalty, the maximum penalty allowed).
Payment reductions are calculated by subtracting the PAF from 1.0 and multiplying by 100. So for example, a hospital with a PAF of 0.975 would have a payment reduction of 2.5%:
1.0 - 0.9750 = 0.025 x 100 = 2.5% reduction
Since the program began, CMS has doled out $2.5 billion in penalties, with an estimated $564 million in fiscal year 2018 alone, up from the $528 million in 2017. Even though there are signs that readmission rates in a variety of condition types are improving, of the 3,241 hospitals evaluated for readmissions between October 2017 and September 2018, 2,573 (80%) were penalized.
The maximum penalty for hospitals is 3%. However, very few hospitals have penalties this high levied against them—in FY 2017, just 1.8% of hospitals paid the highest penalties.
In this special three-part series, Managed Healthcare Executive will be bringing you the ultimate guide on reducing readmissions for each of the six conditions CMS tracks. This first part will take an in-depth look at how hospitals can prevent heart-failure readmissions.
