Current Status of CMS Hospital Readmission Penalty Program

Notwithstanding significant controversy about methods and fairness, the Centers for Medicare and Medicaid Services keeps rolling right along with its hospital readmissions program.  A Kaiser Family Foundation brief looks at the results as the second year ends.   (Kaiser Brief)   For the second year, $227 million in penalties will be applied to payments to 2225 hospitals that have “excess” readmissions, at least according to CMS.  Eighteen hospitals will get the maximum 2% reduction in payments for the next year and another 154 will lose over 1% of payments.  The total amount of penalties is down $53 million from the first year and about 1370 hospitals lowered their penalty from the first year, so that might be a sign of improvement.  On the other hand, 1074 hospitals are getting increased penalties.  The number going up and down suggests a lot of pure regression to the mean, which has nothing to do with performance and everything to do with statistical randomness.  In some states, like Alabama, Arkansas, Florida, Kentucky, Illinois, Massachusetts, New York, New Jersey and Tennessee, about 80% of the hospitals are being penalized, which suggests something at work regarding the health status of the population in those states.  While CMS changed some aspects of the formula, like the obvious one of omitting planned readmissions, the program still hits hospitals treating poor people the hardest and those are likely the hospitals that can least afford to lose revenue.  While many hospital readmissions are likely avoidable, the CMS formula does a very poor job of identifying these and as the penalty ratchets up to 3% next year, CMS needs to give a hard rethink to whether it is achieving the goal of improving quality or is just nailing hospitals for something they have little control over.