Impact of the Hospital Readmission Penalty Program

The CMS initiative to reduce inappropriate hospital readmissions began in 2012 and so far has cost hospitals about $1 billion in revenue.  The initiative targeted three conditions–heart attack, heart failure and pneumonia.   So how is it working?  A new study published in the Journal of the American Medical Association compares results for penalized and non-penalized facilities and for targeted and all conditions, using a 30-day, risk-adjusted, all-cause, unplanned readmission rate.  (JAMA Article)   Data on Medicare hospitalizations from 2008 through mid-2015 were used.   As other research has indicated, hospitals which were penalized tended to be larger, teaching hospitals and have more Medicaid patients.  Readmission rates for both penalized and non-penalized hospitals declined across both targeted and all conditions during the study period.

Hospitals which ended up being penalized eventually had greater readmission reductions than institutions which were not penalized.  Reductions in readmissions were greater at the penalized institutions for the target conditions than non-targeted ones, while non-penalized facilities had equal reductions in readmissions across all conditions.  In fact the hospitals that weren’t penalized had no significant change in readmission rates for the targeted conditions, suggesting that all that happened was that penalized facilities got their rates down to those of unpenalized ones.  The rate of change in readmission rates and the actual rates, however, have plateaued since 2012, for both penalized and non-penalized hospitals and targeted and all conditions.

The most reasonable conclusion to be drawn is that hospitals that realized they were likely to be penalized made an effort to reduce their readmissions for the targeted conditions, and after a couple of years successfully got those rates down to the level of the better-performing hospitals.  These institutions also experienced a modest spillover effect on readmission rates for non-targeted conditions.  The hospitals that realized they were unlikely to be penalized probably didn’t do much of anything and had no real change in readmission rates.  So was the program a success?  If it was, whatever effect it was going to have occurred by 2012 and it isn’t having any impact now.