Most Hospitals Received Annual Penalties For Excess Readmissions, But Some Fared Better Than Others.

The Hospital Readmissions Reduction Program (HRRP) initiated by the Affordable Care Act levies financial penalties against hospitals with excess thirty-day Medicare readmissions. We sought to understand the penalty burden over the program's first five years, focusing on characteristics of hospitals that received penalties during all five years, how penalties changed over time, and the relationship between baseline and subsequent performance. More than half of participating hospitals were penalized by the Centers for Medicare and Medicaid Services in all five years of the program. From fiscal years 2013 to 2017, the growth in average penalties was modest, doubling from 0.29 percent to 0.60 percent, despite increasing opportunities for penalization. The penalty burden was greater in hospitals that were urban, major teaching, large, or for-profit and that treated larger shares of Medicare or socioeconomically disadvantaged patients. Surprisingly, hospitals treating greater proportions of medically complex Medicare patients had a lower cumulative penalty burden compared to those treating fewer proportions of these patients. Lastly, we found that hospitals with high baseline penalties in the first year continued to receive significantly higher penalties in subsequent years. For many hospitals, the HRRP leads to persistent penalization and limited capacity to reduce penalty burden. Alternative structures might avoid persistent penalization, while still motivating reductions in hospital readmissions. Project HOPE—The People-to-People Health Foundation, Inc.