Research estimates that nearly one in five hospitalized Medicare patients ends up back in the hospital within 30 days of discharge. These rehospitalizations are costly and potentially harmful. Many are also avoidable. As part of the Affordable Care Act, The Centers for Medicare & Medicaid established readmission penalties to decrease avoidable readmissions. Some healthcare providers and experts believe that this policy unfairly penalizes hospitals that care for low-income patients.

The penalties went into effect in 2013, reducing Medicare payments for hospitals with higher-than-average 30-day readmissions for heart failure, acute myocardial infarction and pneumonia. In 2015, COPD and hip or knee replacement were added to the list. Hospitals can now lose up to 3% of their Medicare payments. Even being admitted for something other than the original diagnosis counts toward a hospital’s readmission rate if it happens within 30 days of a prior admission.

In 2015, 78% of U.S. hospitals received penalties for a total loss of $420 million. In New York City’s League of Voluntary Hospitals and Homes and Health and Hospitals Corporation alone, hospitals lost approximately $20.3 million. This is a significant amount, especially as budgets grow tighter.

As a Commonwealth Fund issue brief and other analyses have found, so-called “safety net” hospitals—those that care for a disproportionate share of low-income patients—are substantially more likely to be penalized than hospitals caring for higher-income patients. Hospital readmission rates, they point out, are adjusted for risk factors including gender, age, and health status, but not for patient socioeconomic status (SES).

A discussion in the Health Affairs blog makes the case for SES risk adjustment noting that safety net hospitals are effectively being penalized for factors outside their control. “Hospital readmission rates are influenced not only by what the hospital does, but also the patient’s home, family availability, use of outpatient care, use of community resources, and health literacy,” the authors write. “The standard of care delivered may be the same or comparable while the outcome on readmissions differs in safety net hospitals because of the challenges created by the social circumstances of their patients once they leave the facility.”

Learn More

This 2013 Labor Management Project Research Bulletin summarizes the hospital readmissions program and best practices for reducing avoidable readmissions. It also provides links to useful resources.

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