Medicare fines record number of hospitals under the ACA’s Hospital Readmission Reduction Program

October 9, 2014

A record number of hospitals are being fined a total of $428 million by Medicare for excessive readmissions.

A record number of hospitals are being fined by Medicare for having too many hospital readmissions, according to an analysis of federal records by Kaiser Health News.

The $428 million in fines were levied against 2,610 hospitals, with 39 receiving the largest penalty allowed.

Penalties are assessed when the number of Medicaid patients who are readmitted within 30 days of discharge exceeds a national benchmark. The latest penalties are based on readmissions from July 2010 through June 2013, notes the analysis.

This is the third year that the U.S. Centers for Medicare and Medicaid Services has levied the penalties. They first went into effect in 2012 following establishment of the Hospital Readmissions Reduction Program (HRRP) as part of the Affordable Care Act. The HRPP requires the U.S. to reduce payments to hospitals with excess readmissions.

Of hospitals subject to HRRP, 75% are being penalized, says the analysis. The fine is levied by lowering Medicare reimbursements for subsequent patients for the following year.

CMS uses a complex formula to determine acceptable readmission rates for each hospital, but their methodology has come under fire, with critics noting that hospitals have to hit a number lower than the overall industry.

Certain cancer, critical access, psychiatry and rehabilitation hospitals are exempted from the penalties as are hospitals in Maryland because they have a different payment arrangement with Medicare.

CMSreported that the readmission rate had dropped to 17.8% in the last quarter of 2012 following implementation of HRRP, down from almost 20% in the prior year. It estimates that potentially-avoidable readmissions cost the government $17 billion annually.