2,200 hospitals face Medicare pay penalty for readmissions

The rate reduction for too many repeat patient stays fails to account for socioeconomic factors and leaves poorer communities at a disadvantage, facilities say.

By CHARLES FIEGL, amednews staff. Posted Aug. 27, 2012.

Washington Medicare soon will begin penalizing hospitals for excess readmissions, which critics argue in some cases can stem from factors outside a facility’s or doctor’s control.

The health system reform law required Medicare to adopt a program to reduce 30-day readmission rates in hospitals. An Aug. 1 Centers for Medicare & Medicaid Services regulation codified the details of the program, revealing that Medicare will reduce payments by up to 1% for more than 2,200 hospitals, which comprise about two-thirds of U.S. facilities.


CMS developed a formula to assign each hospital a benchmark for excess readmissions in three categories — heart attack, heart failure and pneumonia. Those hospitals that exceed the readmissions ratio will lose a total of $300 million during the 2013 program year that begins Oct. 1. For hospitals that don’t improve, penalties will grow to a maximum of 2% for the 2014 program year and 3% for 2015.

A 2007 Medicare Payment Advisory Commission report concluded that more than 17% of hospital patients were readmitted within 30 days in 2005. A 2006 Commonwealth Fund Report projected that the Medicare program could save $1.9 billion a year if the national readmission rate were lowered to levels achieved by the best-performing facilities. Median 30-day hospital readmission rates for heart attack patients is 19.9%, 24.8% for those with heart failures and 18.4% for cases of pneumonia, CMS stated in the rule.

About two-thirds of U.S. hospitals stand to be penalized for excess readmissions starting Oct. 1, 2012.

Hospitals had argued that penalties should be assessed only for aspects they can control. The American Hospital Assn. and the Assn. of American Medical Colleges had asked CMS to consider socioeconomic factors that can lead to patients being readmitted. Facilities had suggested that rates be adjusted to account for numbers of Medicaid beneficiaries as well as for planned or unrelated readmissions. Other factors that need to be considered include patient access to follow-up health care services, such as availability of primary care physicians and ability to afford prescribed medicines, said Nancy Foster, AHA’s vice president of quality and patient safety policy.

“Hospitals will lose a substantial amount of money and find it more difficult to help those communities,” Foster said.

Poorer communities with hospitals facing the maximum penalties will be hurt by the new program, said Gregory Maynard, MD, senior vice president for the Society of Hospital Medicine’s Center for Hospital Innovation & Improvement. Some areas of the country where hospitals have low readmission rates, such as Utah and Idaho, will be spared.

In the final rule, CMS said it needs to examine the role that socioeconomic factors play in readmissions. The Medicare agency also says it wants to avoid adjustment factors that would create differing standards of quality for different patients. But hospitals will not receive the additional time they requested to lower readmissions before penalties are assessed starting in October.

“Since we believe that all hospitals should be working towards the goal of reducing readmissions on an ongoing basis, regardless of population, we believe that we do not need to postpone the implementation of the readmission payment adjustments in order to provide time to hospitals to implement readmission reduction programs,” CMS said.

SSM Health Care, based in St. Louis, operates 17 hospitals in Illinois, Missouri, Oklahoma and Wisconsin. More than half of SSM Health Care facilities will be penalized.

The hospital system has been working to reduce rates by improving care transitions, said Gaurov Dayal, MD, SSM Health Care’s chief medical officer. For instance, hospitals will arrange for a home health professional to visit chronically ill patients released after a stay for congestive heart failure. The health professional would work to ensure discharge instructions are being followed to help prevent a readmission.

Several factors can lead to readmissions, and no one solution will reduce readmissions to zero, he said. That is a fact he said the entire health care community must understand.

“It isn’t something that only a hospital can solve,” Dr. Dayal said. “We have a fragmented delivery care model that we’re trying to improve.”



How big will the Medicare readmissions penalty be?

The Centers for Medicare & Medicaid Services estimates that more than 2,200 hospitals will have their base Medicare payments reduced in 2013 by a new adjustment for excess readmissions. Total hospital pay will be decreased by 0.3%. A CMS analysis showed that urban hospitals in the mid-Atlantic and rural hospitals in the East South Central and West South Central regions will see the highest decreases.





Up to 0.09%


0.10% to 0.19%


0.20% to 0.29%


0.30% to 0.39%


0.40% to 0.49%


0.50% to 0.59%


0.60% to 0.69%


0.70% to 0.79%


0.80% to 0.89%


0.90% to 0.99%





Source: Final rule on Medicare hospital readmission payment policy, Centers for Medicare & Medicaid Services, Aug. 1 (ofr.gov/ofrupload/ofrdata/2012-19079_pi.pdf)