Medicare Readmission Penalties Disproportionally Affect Hospitals Caring for Poor, UTHSC Researchers Find

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Micheal P. Thompson, a postdoctoral fellow, is lead author of a study of Medicare readmission penalties done by researchers at UTHSC.

Penalties instituted under the Affordable Care Act to reduce hospital readmission rates have cut readmissions for certain conditions, but they also disproportionally penalize hospitals that care for the socioeconomically disadvantaged, according to a study by researchers at the University of Tennessee Health Science Center (UTHSC).

A data comparison by the Health Services and Policy Research Group in the Department of Preventive Medicine at UTHSC evaluated the impact of the Hospital Readmissions Reduction Program (HRRP) over its first five years. Their paper on the analysis was published Monday in the May issue of Health Affairs, the leading journal of health policy thought and research.

“The evidence on the policy suggests that it is reducing readmissions, but I think what our study shows is the policy persistently penalizes certain hospitals, and these tend to be the ones that treat the socioeconomically disadvantaged,” said lead author Michael P. Thompson, a postdoctoral fellow at UTHSC.

The HRRP levies fines against hospitals with excess 30-day Medicare readmissions following hospitalizations for certain conditions, such as pneumonia, congestive heart failure, or heart attack. The UTHSC team sought to understand the overall penalty burden on hospitals, how the penalties have changed over time, and how hospital performance has changed since the HRRP  began.

While penalty amounts have risen modestly, the group found that hospitals with higher initial penalties continued to receive higher penalties in subsequent years, even though their readmissions have been declining, Thompson said. These tend to be hospitals that are urban, major teaching institutions, large or for-profit facilities, and that treat larger numbers of Medicare or socioeconomically disadvantaged people

“This policy is one of the more punitive policies that Medicare uses to tie Medicare reimbursement to performance,” he said. “The takeaway of this is that because of the way the penalties are calculated, which is based on relative comparisons to peers, one hospital compared to another, rather than one hospital compared to itself over time, the program leads to hospitals being consistently penalized by the policy, even when they may be making improvements.”

Surprisingly, hospitals that treat a larger number of medically complex patients received fewer penalties, the analysis showed. “Our hypothesis was that hospitals tend to know what type of patients they treat, and if they treat a lot of medically complex patients or multi-comorbid patients, they may have already taken steps to try to reduce those hospital readmissions.”

Thompson said it is hoped the analysis, which included data for 3,229 hospitals, will inform policymakers and stakeholders as to the benefits and problems associated with HRRP.

“We identify some clear drawbacks in the way that the program assigns penalties,” he said. “Our hope is that policymakers can look at that and ask if there are other ways to make the policy do what it’s doing in terms of reducing readmissions, while still allowing hospitals to avoid a penalty.”

Solutions might include changing the policy to consider a hospital’s year-to-year improvement, instead of only linking penalties to how a hospital’s readmission rate compares to that of other hospitals. Readmission rates might also be adjusted to better reflect the socioeconomic status of the patients a hospital serves.

Additional authors of the study are Teresa Waters, PhD, chair of the UTHSC Department of Preventive Medicine; Cameron Kaplan, PhD, assistant professor in the UTHSC Department of Preventive Medicine; Yu Cao, MS, doctoral candidate in the Virginia Commonwealth University Department of Biostatistics; and Gloria Bazzoli, PhD, Bon Secours Professor of Health Administration at Virginia Commonwealth University.