Readmissions Penalty Program May Be Having Little Effect

January 10, 2019 9:00 am

It may be possible to design a readmissions tracking system that is more accurate, but such a system would be vastly more complicated, said one researcher.

Jan. 9—Medicare’s $500 million readmissions penalty program may have cut readmissions by only half as much as the half-million that previously was estimated—or not cut them at all, according to new research.

Medicare’s Hospital Readmissions Reduction Program (HRRP) has been credited with lowering risk-adjusted readmission rates for targeted conditions at general acute care hospitals. But a study published this month in Health Affairs concluded those reductions may be illusory or overstated.

The researchers concluded that concurrent changes in electronic transaction standards allowed hospitals to document a larger number of diagnoses per claim, which had the effect of reducing risk-adjusted patient readmission rates.

Accounting for the revised standards reduced a previously identified decline in risk-adjusted readmission rates for targeted conditions by 48 percent, the study found. Additionally, when adjusting for differences in pre-HRRP readmission rates across samples, the researchers found that declines for targeted conditions at general acute care hospitals were statistically indistinguishable from declines in two control samples.

“Either the HRRP had no effect on readmissions, or it led to a systemwide reduction in readmissions that was roughly half as large as prior estimates have suggested,” the authors wrote.

“It’s nothing that looks like maliciously intended gaming,” said Christopher Ody, an author of the study and a research assistant professor in the Kellogg School of Management, Northwestern University, Evanston, Ill. “In some sense it’s a data quirk.”

The HRRP penalizes hospitals by up to 3 percent of their base Inpatient Prospective Payment System payments for readmission rates among selected conditions that are higher than expected rates. In September, the Centers for Medicare & Medicaid Services (CMS) announced that 2,599 hospitals (82 percent of eligible hospitals) will face HRRP cuts in FY19.

Medicare projected HRRP penalties will cut overall hospital payments by $566 million in FY19, compared with $564 million in FY18.

Supporters of the HRRP have touted its success by pointing out that readmissions reductions have been larger among conditions targeted by the program.

But those reductions occurred among conditions that also had the largest readmission rates—and the most room to fall, the new study found.

“Having higher baseline risk-adjusted readmission rates was correlated with larger decreases in risk-adjusted readmission rates over time, apart from the program,” Ody said in an interview. “It was an orange with more juice in it, so there was more you could squeeze out.”

The research also may explain why some hospitals have struggled to improve their performance under the HRRP, despite focusing resources on reducing readmissions.

“You could have two hospitals where one has done more to improve their readmission rates over time, but because of the coding issue will have found that their relative performance has worsened over time,” Ody said.

The coding issue has had varying effects on hospitals’ changes in risk-adjusted readmission rates over time, Ody said.

Significance of the Findings

Ody does not oppose the HRRP, but he said his research raises the question of how much Medicare can possibly reduce risk-adjusted readmissions.

“If we take at face value that everyone has been doing what they can to figure out how to reduce risk-adjusted readmission rates, the answer is that it’s probably harder to do this than we previously thought,” Ody said.

He and his colleagues chose to focus on the HRRP because it was seen as the program where pay for value had produced the best results.

“The evidence that this is where it has worked is much weaker than we had thought just a year ago,” Ody said. “This calls into question, to some extent, how effective value-based payment schemes are at creating the desired behavior.”

However, Ody does not rule out that the HRRP has had an effect.

“There has been a long-term decrease in risk-adjusted readmission rates; there was a particularly rapid piece of that following the [enactment of the Affordable Care Act]. A large share of that we have shown to be spurious, but some of that remains,” Ody said. “What is driving that remaining decrease remains an important question,” specifically whether the decrease is due to the HRRP or something else. 

Medicare data had found that since 2010 hospitals have prevented more than 565,000 readmissions.  

Opportunities to improve the accuracy of the HRRP will depend on whether policymakers believe the ends will justify the costs, Ody said.

“You could try to design a program like this to rule out every incentive for gaming on day one, and that program would be far too complicated and no one would be able to understand it—and that’s in some sense a bigger downside than recognizing the set of incentives you create are going to be imperfect and you need to tweak them as you go along,” Ody said.

Latest HRRP Changes

CMS implemented only minor changes in the program for FY19. The agency will continue to implement a socioeconomic adjustment approach that was mandated by the 21st Century Cures Act of 2016 and first adopted for FY18.

Previous research has shown that the likelihood of being readmitted to a hospital also is affected by socioeconomic issues, such as income, insurance status, and access to pharmacies, transportation to follow-up appointments, and grocery stores.

Hospital advocates, such as the American Hospital Association (AHA), have continued pushing for changes to the HRRP, such as using more-accurate measures and updating the penalty formula to ensure it provides the right incentive to improve.

For instance, AHA urged that the program move beyond its current socioeconomic adjustment approach, which is based on hospitals’ shares of dual-eligible Medicare-Medicaid patients. The current approach may be impacted by states’ decisions on whether to expand Medicaid eligibility and may miss the share of homeless patients treated by hospitals, AHA wrote in June in a comment letter to CMS.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Email him at [email protected]. Follow Rich on Twitter: @rdalyhealthcare


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