In a recent analysis of its Hospital Readmissions Reduction Program (HRRP), CMS found that around 2,300 hospitals will face HRRP penalty reductions in fiscal year (FY) 2023, the lowest number of hospitals penalized in almost 10 years, Jordan Rau writes for Kaiser Health News.

How the HRRP works

Under the HRRP, CMS withholds up to 3% of regular reimbursements for hospitals if they have a higher-than-expected number of 30-day readmissions for any of six conditions:

• Chronic lung disease
• Coronary artery bypass graft surgery
• Heart attacks
• Heart failure
• Hip and knee replacements
• Pneumonia

Historically, hospitals received a penalty if their observed readmissions for any one of these conditions exceeded a national standard. However, in response to criticism, CMS in 2019 scrapped the national comparison standard. It now compares hospitals' performances with that of other hospitals serving a similar population of low-income patients.

Under the current methodology, CMS has categorized all participating hospitals into quintiles according to the proportion of dual-eligible patients (patients eligible for Medicare and Medicaid) each hospital serves. Now, each hospital is compared with the median readmissions performance of its cohort, and hospitals with higher-than-cohort-median performance are penalized.

The program does not apply to veterans hospitals, children's hospitals, psychiatric hospitals, or hospitals in Maryland, which has a federal waiver for how it distributes Medicare funding. In addition, hospitals are not evaluated under the program if they do not treat enough cases of the conditions evaluated.

Fewer hospitals are being penalized this year

For FY 2023, CMS analyzed data from July 2018 to December 2019 and July 2020 to June 2021. Claims from the first half of 2020 were excluded due to upheaval from the pandemic. The pneumonia readmission measure was also excluded since it was difficult to distinguish these patients from those with Covid-19.

Overall, CMS found that 2,273 hospitals will face HRRP penalties for FY 2023. According to a Kaiser Health News analysis, this is the lowest number of hospitals facing penalties since the FY ending September 2014.

The average payment reduction was 0.43%, the lowest it has been since 2014. These reductions will be applied to affected hospitals from Oct. 1 through September 2023 and cost $320 million over the next year.

In total, 25.33% of hospitals will not receive readmission penalties for FY 2023. The number of hospitals that have to pay penalties over 1% has dropped by over 50% from 543 in FY 2022 to 231 in FY 2023.

See how your hospital fared.

Commentary

According to Akin Demehin, senior director for quality and patient safety policy at the American Hospital Association, CMS' efforts to eliminate pandemic-related consequences from its calculations likely contributed to the decrease in penalties.

While hospitals' efforts to reduce readmissions may be partially responsible for the drop in penalties, Demehin noted that penalty rates were increasing before the pandemic—even though health systems were improving on the program's measures.

In addition, some hospitals may not have been able to meet the minimum number of cases to receive a score on various admissions measures after six months of data was excluded. "When hospitals can't get scored on certain measures, it could cause their penalty to go down," Demehin said.

Because of these changes in CMS' calculations, "[i]t doesn't necessarily feel like progress is being rewarded," Demehin said. "While the number of hospitals getting a penalty for this fiscal year is smaller than it was in prior years, it's important to note that around three quarters of hospitals are still getting readmissions penalties."

Overall, "Covid has been a tremendously disruptive force for all aspects of health care, most certainly CMS' quality measurement programs," Demehin said. "It's probably going to be a couple of volatile years for readmission penalties." (Rau, Kaiser Health News, 11/1)