Medicare Hospital Readmissions Reduction Program

To improve care and lower costs, Medicare imposes a financial penalty on hospitals with excess readmissions.

Outside of a hospital

Policy-makers are constantly searching for ways to improve the quality of patient care and lower Medicare program spending.

One indicator of inadequate quality that results in increased Medicare spending is the rate of readmissions to a hospital.

Readmission refers to a patient being admitted to a hospital within a certain time period from an initial admission. In the context of Medicare, readmissions have been generally defined as a patient being hospitalized within 30 days of an initial hospital stay. If a hospital has a high proportion of patients readmitted within a short time frame, it may be an indication of inadequate quality of care in the hospital or a lack of appropriate coordination of postdischarge care. Although not all readmissions can be prevented, research shows that there are strategies that hospitals can employ to avert many readmissions.

This brief describes the Medicare Hospital Readmissions Reduction Program (HRRP) established in the Affordable Care Act (ACA) that provides a financial incentive to hospitals to lower readmission rates. Although the program has been in operation for only few years, initial results show potential. A number of technical issues in the program design have been identified and are being addressed by the Centers for Medicare and Medicaid Services (CMS) through the administrative process. However, there are also concerns about potential flaws in the program’s methodological approach. Others fear unintended consequences for safety-net hospitals that may threaten care for vulnerable populations.

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