Readmissions Reduction Program

Our last post provided an explanation of the VALUE-BASED PURCHASING PROGRAM (VBP), which links financial incentives to a provider’s performance on a defined set of measure domains.1 This time, we’ll take a look at another program established by the Affordable Care Act (ACA): the READMISSIONS REDUCTION PROGRAM.

The READMISSIONS REDUCTION PROGRAM is a three-year rolling process of reporting all-cause readmissions within 30 days of discharge. They are categorized as follows2:

  • AMI | Acute Myocardial Infarction
  • HF | Heart Failure
  • PN | Pneumonia
  • COPD | Chronic Obstructive Pulmonary Disease
  • CABG | Coronary Artery Bypass Grafting
  • THA | (elective) Total Hip Arthroplasty
  • TKA | (elective) Total Knee Arthroplasty

Each hospital receives an “Excess Readmissions Ratio,” which is a measure of a hospital’s readmission performance compared to the national average for the hospital’s set of patients with that applicable condition.2 The calculation uses a risk adjustment methodology endorsed by the National Quality Forum (NQF) for the readmissions measures to calculate the excess readmission ratios. It includes adjustments for factors that are clinically relevant including patient demographic characteristics, comorbidities, and patient frailty.2

The READMISSIONS REDUCTION PROGRAM, is a three-year rolling program that is scheduled as follows:

The table below shows a recap of the first 5 years of the Readmissions Reduction Program.3

Year penalties applied
2013 2014 2015 2016 2017
Percent of hospitals penalized 64% 66% 78% 78% 79%
Percent of hospitals at maximum penalty 8% 0.6% 1.2% 1.1.% 1.8%
CMS estimate of total penalties $290 M $227 M $428 M $420 M $528 M

The increase in average and total penalties for 2017 is due mostly to a larger number of medical conditions added to the calculations for FY 2017 (eg, the types of pneumonia cases that were assessed and calculated readmission rates following CABG surgery).3

For an example of what this might mean, let’s look at an average 300-bed Community Hospital with 48% of their patients being Medicare beneficiaries. If they have an inpatient Medicare revenue of $26,000,000 and received a $20,000 payment reduction for a condition/diagnosis, a maximum 3% penalty would be $600. That same reduction would be applied to EVERY inpatient Medicare claim submitted during the fiscal year and could result in a penalty of $780,000.

And while the READMISSIONS REDUCTION PROGRAM has spawned some key programs, such as Accountable Care Organizations (ACOs), bundled-payment initiatives, and medical home programs3, there is growing scrutiny of the program that suggests it is unfair. According to a new study published in JAMA Cardiology, the program may unfairly level 30-day readmission penalties against hospitals that care for more severely ill patient populations.4

For the study, researchers examined one-year heart attack outcomes for more than 50,000 patients treated at 377 hospitals. Researchers identified no difference in one-year mortality rates and long-term readmission rates between hospitals deemed to have high readmission rates per the 30-day standard.

Ambarish Pandey, MD, a cardiologist with the University of Texas Southwestern Medical Center in Dallas and one of the study’s authors said, “The current CMS readmission metric does not correlate with long-term clinical outcomes.”

We’ll have to wait and see how the Centers for Medicare and Medicaid Services (CMS) responds. Join us for our next blog, when we’ll look at Hospital-Acquired Conditions Reduction Program and its effect on your institution.

Minimizing infection risk is an essential part of optimizing “The Triple Aim” of the Affordable Care Act. Eloquest Healthcare is committed to providing solutions that can help you reduce risk of conditions like a CAUTI, CLABSI, or SSI.


  1. Hospital Value-Based Purchasing. Department of Health and Human Services, Centers for Medicare & Medicaid Services. Published April 18, 2016. Accessed January 16, 2017.
  2. Understanding the Hospital Readmissions Reduction Program. The Lake Superior Quality Innovation Network, Centers for Medicare & Medicaid Services Quality Improvement Organization Program. Published November 2014. Accessed January 16, 2017.
  3. Aiming for Fewer Hospital U-turns: The Medicare Hospital Readmission Reduction Program. The Henry J. Kaiser Family Foundation. Accessed March 30, 2017.
  4. Pandey A, Golwala H, Hall HM, et al. Association of US Centers for Medicare and Medicaid Services Hospital 30-Day Risk-Standardized Readmission Metric With Care Quality and Outcomes After Acute Myocardial Infarction. JAMA Cardiology, 2017. DOI: 10.1001/jamacardio.2017.1143 5. UT Southwestern Medical Center. Readmission policies don’t correlate to heart attack outcomes. Science Daily. Published April 26, 2017. Accessed May 25, 2017.