Medicare rang in the new federal fiscal year by withholding funding from over 2,000 hospitals nationwide with high readmission rates.  Medicare Rule CMS-1588-F outlines the Readmissions Reduction Program authorized under Section 3025 of the Affordable Care Act (“the Act”).  Under the Act, quality of hospital care is measured in part by a low number of patients being readmitted within 30 days of their release. Medicare is penalizing two-thirds of the hospitals it evaluated by withholding up to 1% of their Medicare reimbursements.  The percentage penalty will grow to 2% in 2013 and increases to 3% in 2015.  In Illinois, one of the states hardest hit by the new penalty, 112 hospitals (27 of which are in Chicago) are losing a portion of their Medicare funding.  In Indiana, 41 hospitals are facing lowered reimbursements.  Additionally, Medicare ran recalculations in late September increasing the penalties of two-thirds of the hospitals it initially penalized.  Kaiser Health has published an updated PDF list of all hospitals affected and the respective rates of withheld funds, which can be accessed here. 

According to the Centers for Medicare & Medicaid Services, “Nearly one in five Medicare patients discharged from a hospital—approximately 2.6 million seniors—are readmitted within 30 days, at a cost of over $26 billion every year.” This year, Medicare intends to recoup $280 million of those costs from hospital readmission related funding cuts.  The Readmission Reduction Program has been widely criticized because many of the highest ranked hospitals nationally are being penalized.  One of the major criticisms of the program relates to how readmissions are being captured.  The program currently tracks readmission rates for three major health issues that were selected due to their volume.  The patient’s diagnosis at the time of the first visit determines whether or not their readmission is tracked, regardless of whether or not the readmission diagnosis is related.  This variable is constant across all evaluated hospitals.

In addition to the criticisms of how the readmissions are tracked, there are also major concerns over how the Readmission Reduction Program penalizes: (1) hospitals that serve a high number of low-income traditionally underserved individuals; (2) teaching hospitals; and (3) hospitals that serve high numbers of certain minority populations.  In response, Medicare has named a few hospitals that face these issues and are not being penalized.  However, the majority of the hospitals facing these issues are having their funding reduced.