In its final rule on the inpatient prospective payment system, the Centers for Medicare & Medicaid Services (CMS) announced on August 2 a record increase in readmission penalties under the Hospital Readmission Reduction Program (HRRP) and an expansion of the program to readmissions following coronary artery bypass graft surgery. The HRRP penalizes hospitals for readmissions of beneficiaries with certain conditions within 30 days of discharge.

CMS estimates that it would penalize 2,588 hospitals, constituting more than half the nation’s hospitals, for excessive admission rates in fiscal year 2017. Although this is approximately the same number penalized last year, the average penalty will increase by a fifth, according to a Kaiser Health News analysis, from 0.61% to 0.73%, for a total of $528 million, about $108 million more than last year. CMS estimates that 49 hospitals will receive the maximum penalty of a 3% reduction in Medicare reimbursements.

Payment cuts under the HRRP apply to all Medicare patients, not just to beneficiaries with conditions subject to readmission penalties. Such conditions include myocardial infarction, heart failure, pneumonia, chronic obstructive pulmonary disease, hip and knee replacements and – new for 2017 – coronary artery bypass graft surgery.

As explored in an article by McCarter & English attorneys Justin Linder and Dennis Barrett that was published in AHLA Connections in March, the imposition of increased readmission penalties comes amid a simmering debate among health care policymakers over how to appropriately address the influence of sociodemographic status on readmission rates. Currently, CMS does not consider the challenges faced by hospitals serving low-income patient populations that have trouble affording the medications or implementing the lifestyle changes required to recover from conditions subject to readmission penalties. Although the CMS final rule once again declines to adjust penalties to account for such factors, there are a number of initiatives, outlined in the article by Linder and Barrett, that hospitals have successfully implemented to reduce readmissions among disadvantaged patient populations.