Hospitals in California, Other States Face Medicare Readmission Penalties

A majority of hospitals in California and other states that in CMS’ Hospital Readmissions Reduction Program will be penalized in fiscal year 2016 for having too many patients return within one month of discharge, Modern Healthcare reports (Rice, Modern Healthcare, 8/3).

According to CMS data released Friday, about 2,600 hospitals will lose about $420 million in Medicare payments, which is about $6 million more than hospitals lost last year (Federal Register, 7/31).


CMS in October 2012 launched the readmissions program under the Affordable Care Act to rein in costs. Under HRRP, CMS in the first year withheld up to 1% of regular reimbursements for hospitals with high patient readmissions within 30 days of discharge because of three medical conditions: heart attack, heart failure and pneumonia. The penalty increased to a maximum of 2% in 2013. CMS in October 2013 launched the second phase of HRRP, in which hospitals saw reductions in their Medicare reimbursements if they were not able to cut the number of patients readmitted within one month of discharge (Rau, Kaiser Health News, 8/3).

In FY 2015, CMS added chronic lung problems and some hip or knee replacements to the list of conditions from which reimbursements were calculated and increased the penalty to 3% (Rice, Modern Healthcare, 8/3).

According to Kaiser Health News, readmission rates have fallen nationwide since HRRP began, but about one in five Medicare beneficiaries who visit a hospital still are readmitted within one month (Kaiser Health News, 8/3).

Details of Penalties

According to an analysis of the new CMS data, of about 3,400 hospitals that participated in HRRP:

-799 face no penalty because of a low number of readmissions (Rice, Modern Healthcare, 8/3);
-506 will face a penalty of 1% or more;
-All but 209 penalized this year were also penalized last year; and
-38 hospitals will face the maximum 3% penalty.

Many hospitals were exempt because they are critical access hospitals, specialize in particular types of patients or treated an insufficient number of Medicare beneficiaries to perform data analysis.

According to the analysis, more than 75% of hospitals in Alabama, Connecticut, Florida, Massachusetts, New Jersey, New York, Rhode Island, South Carolina, Virginia and Washington, D.C., were penalized. Meanwhile, less than 25% of hospitals in Idaho, Iowa, Kansas, Montana, Nebraska, North Dakota and South Dakota were penalized.

At least one hospital in every state but Maryland, which has a special exemption, was penalized (Kaiser Health News, 8/3).
California Hospitals

In total, 313 California hospitals participated in the program (Modern Healthcare, 8/3). Of those, 224, or 65%, received penalties.

According to the data, the average penalty among California hospitals was 0.4% (Kaiser Health News, 8/3).

Providence Tarzana Medical Center had the highest penalty, with a 3% reduction. Meanwhile, the lowest penalty in the state was a 0.01% reduction at six hospitals (Modern Healthcare, 8/3).


According to Modern Healthcare, some groups that represent U.S. hospitals say HRRP is unfair because some factors, like patients’ income status, can affect readmission rates in ways beyond the hospital’s control.

CMS on Friday said it is continuing to monitor the health effects of socioeconomic status through a two-year trial with the National Quality Forum (Rice, Modern Healthcare, 8/3).

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