Study Shows Medicare's Readmission Rate Penalties Are Unfair to Safety Net Hospitals

Readmission rates for both safety net hospitals and other hospitals have decreased since Medicare’s Hospital Readmissions Reduction Program (HRRP) went into effect in 2013. However, disparate rates of improvement could show that hospitals in low-income areas are still at a disadvantage, suggest Kathleen Carey, professor at Boston University’s School of Public Health, and Meng-Yun Lin, research data analyst at Boston Medical Center, in their new study. The article, which appears in the September issue of Health Affairs, indicated that policy makers may need to rethink how these hospitals are evaluated and compared.

The HRRP, which was implemented in 2013 as part of the Affordable Care Act, withholds a percentage of Medicare reimbursements to hospitals with high 30-day readmission rates compared with hospitals with a similar case-mix. Readmission rates have fallen since the HRRP was implemented, indicating that the program may be successful in incentivizing hospitals to keep rates low. However, some researchers find the comparisons unfair.

“A frequently voiced concern is related to the program’s impact on safety-net hospitals, which serve a relatively high proportion of low-income patients,” Carey and Lin wrote in the study. Because low-income patients are generally more likely to be readmitted, the safety net hospitals started off in 2013 with higher readmission rates than other hospitals.

With the HRRP in effect, readmission rates for both safety net and other hospitals had declined by 2016 when compared with the initial 2013 rates. In fact, the decrease in the rates over time was larger for the safety net hospitals than the other hospitals. However, the study authors hypothesize that this was due to the safety net hospitals having high rates to begin with and therefore more room for improvement.

Carey and Lin then compared changes in readmission rates at safety net hospitals with a sample of matched hospitals that had similar initial readmission rates. Safety net hospitals showed smaller rates of improvement than these comparable hospitals.

According to the authors, the “growing literature suggests that characteristics of a hospital’s patients and of the community in which it is located are key factors in explaining variation in thirty-day readmission rates.” Accounting for patient variables such as socioeconomic status when calculating readmission rates produces results that look very different from the rates published by CMS. As such, they recommend that CMS account for these factors by imposing penalties based on safety net hospitals’ rates when compared with similar safety net hospitals, instead of comparing them to all other hospitals nationwide.