Medicare readmission penalties exceed $500M for FY 2017

A Kaiser Health News (KHN) analysis of CMS data indicates that Medicare plans to apply reimbursement penalties of $528 million to a total of 2,597 U.S. hospitals during fiscal year (FY) 2017 (October 1, 2016, through September 30, 2017) based on the readmission rate for patients with six common conditions. KHN reports that this aggregate penalty is about $108 million more than the $420 million assessed against hospitals in FY 2016, due to the addition of coronary bypass graft surgery to the list of common conditions for FY 2017.

Section 3025 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program (HRRP), which requires CMS to reduce payments to inpatient prospective payment system (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. The HRRP is designed to support the national goals of improving the quality of care and saving taxpayer dollars by incentivizing hospitals to reduce excess readmissions. The HRRP program began in FY 2013. FY 2017 is the fifth year of the program.

In FY 2013-2014, the HRRP measured readmissions for three conditions, acute myocardial infarction (heart attacks), heart failure, and pneumonia. In FY 2015, the HRRP added the measurement of readmissions for chronic obstructive pulmonary disease (COPD) and total hip and knee replacements. For 2017, the HRRP has added readmissions for coronary artery bypass graft surgery.

As finalized in the FY 2013 IPPS Final rule (77 FR 53397, August 31, 2012), readmissions for the following hospitals and hospital units are exempt from the HRRP:

  • long-term care hospitals;
  • critical access hospitals;
  • rehabilitation hospitals and units;
  • psychiatric hospitals and units;
  • children’s hospitals; and
  • PPS-exempt cancer hospitals.

According to KHN, the maximum reimbursement reduction for FY 2017 is 3 percent and it does not affect special Medicare payments for hospitals that treat large numbers of low-income patients or train residents. Forty-nine hospitals received the maximum fine, according to KHN. The average penalty was 0.73 percent of each Medicare payment, which is the highest to date. In 2016, KHN reported that the average penalty was 0.61 percent.

Hospitals will receive information on their FY 2017 HRRP results from Medicare in their Hospital-Specific Reports (HSRs). The HSRs will include a summary of the hospital’s results along with national observed readmission rates, detailed discharge-level data, and risk factor information. CMS will provide hospitals with their HSRs via QualityNet secure portal accounts at the beginning of the Review and Corrections period.

Hospitals will have 30 days to review their HSR data to ensure that excess readmission ratios were calculated correctly. CMS will notify hospitals of the exact dates of this Review and Corrections period, and will post these dates on QualityNet once they are finalized. Hospitals are cautioned that the Review and Corrections period is a time for them to review their HSR data and submit questions about their result calculations, as needed. The Review and Corrections process is not designed to allow hospitals to submit additional corrections related to the underlying claims data or to add new claims to the data extract used to calculate the rates.

A KHN chart lists the hospitals penalized in FY 2017. The chart notes that in addition to exempt hospitals and hospital units, Maryland hospitals were not penalized because the state has federal permission to set its own Medicare payment rules. CMS also did not levy penalties against hospitals that had too few cases to be fairly evaluated.