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News | Value-Based Payment

Medicare readmissions reduction program penalizes hospitals inaccurately, study finds

News | Value-Based Payment

Medicare readmissions reduction program penalizes hospitals inaccurately, study finds

  • Between 10% and 12% of hospitals penalized by the Hospital Readmissions Reduction Program (HRRP) should not have been, according to a study.
  • Lower-revenue hospitals were more likely to be wrongly assessed penalties.
  • In FY21, 2,545 hospitals will face HRRP penalties, with 41 facing the maximum 3% cut in Medicare payments.

Hospitals are facing half a billion dollars in Medicare cuts based on their readmission rates, but recent research says the underlying data is highly unreliable.

An analysis by Harvard Medical School researchers of the Hospital Readmissions Reduction Program (HRRP), which penalizes hospitals with higher 30-day risk-standardized readmission rates (RSRRs) for several conditions, found in FY19 a ”misclassification of condition-specific penalty status for up to 31% of hospitals.” The misclassifications included inappropriately penalizing some and not penalizing others, according to the study in JAMA Cardiology.

Within each condition, the share of hospitals that incorrectly went unpenalized was:

  •  20.9% for acute myocardial infarction
  • 13.5% for heart failure
  • 13.2% for pneumonia

The share of hospitals that were incorrectly penalized was:

  • 10.1% for acute myocardial infarction
  • 10.9% for heart failure
  • 12.3% for pneumonia

Smaller hospitals were especially likely to be misclassified, said Changyu Shen, PhD, an associate professor at Harvard Medical School and one of the study’s authors.

“The majority of those hospitals with a misclassification in the penalty status are those hospitals with less discharges,” Shen said in an interview. “Many of these hospitals have limited resources, and if they are incorrectly penalized there may by consequences for their patients.”

The effect of misclassification on hospitals that should have received been penalized is less clear, Shen said, because they continue to operate under the threat of future penalties.

The researchers blamed the effect of hospital-level 30-day RSRR measures, which are point estimates based on a finite number of discharges and are “subject to chance errors in measuring the true readmission rate of each hospital.”

“In the extreme case, a hospital classified as worse than the peer-group median by the 30-day RSRR measure may have a true readmission rate that is in fact better than the peer-group median (or vice versa),” the authors wrote.

The issue also likely affected the size of penalties on hospitals, the authors concluded. HRRP penalties range from 0% to 3% of all Medicare fee-for-service payments during a performance period.

When asked about for its views on the study's results, CMS emailed the following written statement:

CMS "is committed to ensuring that quality and safety are high priorities for patients and people with Medicare. We closely monitor performance and outcomes for all of our quality measures. This includes collaborating with stakeholders on performance criteria and carefully using the feedback to assess measure changes and impacts in our decision-making. 

"In the event that a measure change occurs, including HRRP measures, the agency uses the federal rulemaking process to provide notice and seek on-the-record responses from stakeholders and other public comments before any proposed changes would become effective."

How to improve the accuracy of calculations

Shen doubted executives at individual hospitals could determine whether their organization wrongly faced HRRP penalties, given that they would need access to other hospitals’ data as well.

“Number one is what kind of patient got readmitted,” Shen said. “Is there anything you can do about it, rather than to argue if this a mistake or not?”

Follow-up research is needed to understand the effect of the misapplied penalties and then how to fix the problem, Shen said.

To narrow the associated margin of error and minimize the likelihood of misclassifying performance, CMS could extend data collection from three years to 12 years for acute myocardial infarction and to six years for heart failure and pneumonia. That would reduce the rate of penalty-status misclassification to from 31% to 20%, the authors wrote.

“However, this would lead to substantial lag time between the period used to assess performance and the determination of financial penalties,” they wrote.

A possible solution could involve switching from the 30-day readmission measure to the excess days in acute care (EDAC) measure to capture the full spectrum of hospital encounters — including emergency department use — within 30 days of discharge, according to another new study in the Annals of Internal Medicine, which Shen also co-authored.

Significance of the penalty issue for hospitals

The latest CMS data showed 2,545 hospitals will face FY21 HRRP penalties, with 41 facing the maximum 3% cut in Medicare payments. The HRRP produced $553 million in hospital cuts for FY21, CMS estimated. That was a slight decrease from FY20, when 2,583 hospitals incurred $563 million in penalties and 56 hospitals had the maximum cut.

The HRRP has undergone several changes since penalties first were assessed in 2012, including an effort to account for socioeconomic differences among hospitals with larger shares of low-income patients.

But a growing body of research has been critical of the program.

For instance, a January 2019 study in Health Affairs found the HRRP either had no effect on readmissions or led to an industrywide reduction in readmissions that was roughly half as large as prior estimates suggested.

The use of readmission measures also drew significant focus when a study of the high-profile Camden Coalition of Healthcare Providers, which focused on coordinating outpatient care and social services for patients with complex medical and social needs after hospital discharge, found it did not significantly reduce readmission rates.

At least one study even found an increase in mortality since HRRP penalties took effect, but one analysis by the Medicare Payment Advisory Commission found no such link.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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