Readmissions Reduction Program Snapshot

Established under the Affordable Care Act (ACA), the Centers for Medicare & Medicaid Services’ (CMS) Readmissions Reduction Program (RRP) requires reduced payments to inpatient prospective payment system (IPPS) hospitals with excess discharges occurring as of Oct. 1, 2012. The program is intended to assess the number of unplanned hospital readmissions within 30 days of index admission discharge for specific diagnoses. It serves as a penalty program for hospitals exceeding expected readmissions based on national performance. Unlike Value-Based Purchasing, the RRP is a penalty-only program where hospitals can only lose money as a result of performance. Hospitals cannot gain funding for exceeding performance standards. Program penalties are tied to a sliding scale percentage of Medicare reimbursement. The program began with a capped Medicare reimbursement penalty of 1 percent in federal fiscal year (FFY) 2013 and increased to 3 percent beginning in FFY 2015. Penalties are calculated by determining the ratio of predicted readmissions to expected readmissions for each condition. This ratio is used to calculate a hospital adjustment factor that will be applied to the diagnosis-related group (DRG) operating rate. There is no penalty for an adjustment factor of 1.000. Hospitals with adjustment factors from .9700 to .9999 face a reimbursement reduction. Overall, Virginia’s hospitals are projected to lose more than $21 million in FFY 2017, according to Hospital Compare data. The first table below shows the effect of adjustment factor on a facility defined as “Hospital A.” Three conditions were measured in FFY 2013: acute myocardial infarction (AMI), heart failure (HF), and pneumonia (PN). Since then, three new conditions – total hip and knee replacement (THA/TKA), chronic obstructive pulmonary disease (COPD), and cardiac artery bypass graft (CABG) – have been added. As the program has expanded, Virginia has struggled to be a top performer in comparison to other states. Using Hospital Compare data, the bar graph below illustrates Virginia’s performance across the conditions measured by the program. The data show the readmission rate for the specified condition, and Virginia’s ranking in the nation (among a pool of 51). Virginia hospitals had fewer readmissions in 2016 in CABG (14.6 percent) and THA/TKA (4.9 percent). Yet when compared with the rest of the nation, Virginia remains in the bottom quartile in those measures. To improve its standing, gains made in Virginia must exceed those in other states in order to reduce penalties imposed. (4/7)

Research Corner 4-7 a

Research Corner 4-7 b