Medicare’s Hospital Readmissions Reduction Program0


This November 10, 2014, e-Bulletin is from the Health Law Committee of the Business Law Section of the California State Bar.

In its third year, Medicare’s Hospital Readmissions Reduction Program (“RRP”) penalized hospitals for certain excess readmissions, including those relating to acute myocardial infarction (AMI), heart failure (HF), pneumonia (PN), total hip arthroplasty (THA) and total knee arthroplasty (TKA). On October 1, 2014 (the beginning of the new fiscal year for the federal government), the total amount for which a hospital may be penalized increased to 3 percent (up from 2 percent in fiscal year 2014 and 1 percent in fiscal year 2013). In addition to the increased penalty, this year Medicare also introduced four new measures for inclusion in the Hospital RRP: (1) coronary artery bypass grafts (CABG) surgery; (2) chronic obstructive pulmonary disease (COPD); (3) percutaneous coronary intervention (PCI); and (4) other vascular conditions.

For 2015, the formula employed by CMS to calculate the readmissions penalty is:

Aggregate payments for excess readmissions =

[(sum of base operating DRG payments for AMI) x (Excess Readmission Ratio for AMI-1)] + [(sum of base operating DRG payments for HF) x (Excess Readmission Ratio for HF-1)] + [sum of base operating DRG payments for PN x (Excess Readmission Ratio for PN-1)] + [(sum of base operating DRG payments for COPD) x (Excess Readmissions Ratio for COPD-1)] + [(sum of base operating DRG payments for THA/TKA) x (Excess readmissions Ratio for THA/TKA-1)].

Aggregate payments for all discharges = sum of base operating DRG payments for all discharges. Ratio = 1 – (Aggregate payments for excess readmissions/Aggregate payments for all discharges.) Readmission Adjustment Factor for 2015 is the higher of the ratio or 0.9700, all of which is based on claims data from July 1, 2010 to June 30, 2013.

In California, 223 hospitals (64 percent) were penalized, with the average penalty being 0.41 percent. By comparison, 307 hospitals nationwide lost the maximum amount (1 percent) of their patient reimbursements in fiscal year 2013, and only 18 hospitals lost the maximum amount (2 percent) in fiscal year 2014. This year, 39 hospitals will receive the largest penalty (3 percent).  A complete listing of hospital results for fiscal year 2014–2015 is available at this link (courtesy of Kaiser Health News).

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.