Medicare will penalize 2,211 hospitals for readmissions

Cuts will disproportionately impact safety-net hospitals

More than 2,200 U.S. hospitals stand to lose a combined $280 million next year because of CMS penalties for excess readmissions, according to a Kaiser Health News analysis that broke down the penalties by state.

The cuts will come from the Hospital Readmissions Reduction Program, which was mandated by the Affordable Care Act (ACA) and reduces Medicare payments for excess readmissions beginning on Oct. 1, 2012.

For its analysis, KHN examined hospital data released by CMS on Aug. 1. That data included each hospital's "Readmissions Adjustment Factor," which will apply to all base operating DRG reimbursements for fiscal year (FY) 2013, which begins on Oct. 1, 2012. Each hospital's factor is based on its 30-day readmissions for heart failure, myocardial infarction, and pneumonia patients from July 2008 to June 2010.

Altogether, KHN found that 2,211 hospitals will lose payments because of excess readmissions in FY 2013. Specifically, it found that:

  • 278 hospitals will lose 1% of their base Medicare payments, the maximum allowed by the ACA;
  • 1,933 hospitals will lose between 0.01% and 0.99% of their base Medicare payments; and
  • 1,156 will lose no payments. 

How much each state will lose

KHN used each hospital's adjustment factor to determine the average readmissions penalties in each state. It found that the five states facing the most readmissions penalties are:

  • New Jersey (where the average hospital will lose 0.67% of its Medicare payments);
  • New York (where the average hospital will lose 0.51%);
  • District of Columbia (where the average hospital will lose 0.50%);
  • Arkansas (where the average hospital will lose 0.49%); and
  • Kentucky (where the average hospital will lose 0.49%).

Meanwhile, the six states facing the fewest readmissions penalties are:

  • Idaho (where the average hospital will lose 0% of its Medicare payments);
  • South Dakota (where the average hospital will lose 0.01%);
  • Utah (where the average hospital will lose 0.01%);
  • Vermont (where the average hospital will lose 0.02%);
  • New Mexico (where the average hospital will lose 0.04%); and
  • Wyoming (where the average hospital will lose 0.04%).

Penalties will disproportionately affect safety-net hospitals

KHN in its analysis found that 76% of the hospitals that CMS identified as serving large numbers of low-income patients will lose Medicare payments for excess readmissions in FY 2013. In comparison, only 55% of hospitals that CMS identified as serving few low-income patients will lose payments (Rau [1], KHN, 8/13; Rau [2], KHN, 8/13; Rau [3], KHN, 8/13).

Understand the impact on your hospital

The Advisory Board's Data and Analytics Group has assessed the impact of the recently announced readmissions penalties for inpatient hospitals. To view your organization-specific analysis, click here. To speak with our experts at an upcoming webconference on Medicare's inpatient payment rule for FY 2013, click here.


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