Hospital Readmission Reduction Program

Readmissions are tracked by CMS (Centers for Medicare and Medicaid Services) in two of their mandatory quality improvement programs for hospitals paid under the Inpatient Prospective Payment System (IPPS), also known as subsection (d) hospitals.

• The Hospital Readmission Reduction Program (HRRP)
• The Hospital Inpatient Quality Reporting Program (IQR)

Hospital Readmission Reduction Program

The Hospital Readmission Reduction Program (HRRP), implemented in Fiscal Federal Year (FY) 2013, was designed to reduce payments to IPPS hospitals with excess readmissions in specified patient populations. This overview explains the program’s key components and its impact on hospital reimbursements.

An indexed admission occurs when a claim is billed to Medicare Part A with one of the following conditions reported as the principal diagnosis or procedures as specified within the measure.

• Acute myocardial infarction (AMI)
• Chronic obstructive pulmonary disease (COPD)
• Heart failure (HF)
• Pneumonia
• Coronary artery bypass graft surgery (CABG)
• Total hip or total knee arthroplasty (THA/TKA)

The measures are designed to capture unplanned readmissions that arise from acute clinical events requiring urgent rehospitalization within 30 days of discharge. Penalties for poor performance reduce the MS-DRG payment for all Medicare FFS payments during the applicable FY.

Types of Admissions that Contribute to HRRP Performance

Readmission to the same or another short-term acute care (STAC) hospital following an indexed admission are included in the HRRP. The following types of readmissions are not included in the program:

• Planned readmissions (as determined by CMS).
• Same-day readmissions to the same hospital for the same condition.
• Observation stays and emergency department visits.
• Admissions to facilities other than STAC hospitals (hospice, rehabilitation, psychiatric, long-term acute care, or skilled nursing).
• Admissions at an eligible STAC hospital to a unit (hospice, rehabilitation, psychiatric, etc.) that bills under a separate CMS Certification Number.

Defining an Unplanned Readmission

All unplanned readmissions are included regardless of cause. In other words, the second admission does not have to be for the same condition or even related to the indexed admission. Making inferences about the quality-of-care based solely on the documented cause of the readmission is difficult. For example, a patient with systolic heart failure who develops a hospital-acquired infection may be readmitted for sepsis. In this context, sepsis would be related to the care received during the indexed admission for systolic heart failure.

Unfortunately, hospitals cannot designate a readmission as planned through documentation or discharge status codes. Admissions for acute illnesses or complications of care are never considered planned by CMS. CMS uses an algorithm to identify planned readmissions. Medicare considers the following types of care as planned:

• Transplant surgery.
• Maintenance chemotherapy or immunotherapy.
• Potentially planned procedures
  • The procedure is in a category considered planned regardless of the principal diagnosis.
  • The principal diagnosis category that is considered planned.
  • The procedure is one of the defined potentially planned procedures AND principal diagnosis is not on the list of defined acute discharge diagnoses.

Payment Reductions

Payment reductions are the weighted average of a hospital’s performance across the readmission measures during the applicable performance period (July 1, 2021, to June 30, 2024, for FY 2026). The payment adjustment factor determines if, and by how much, payments are reduced up to a maximum 3%. In FY 2026 the following penalties are being assessed:

• 21.8% (641) of hospitals will not be penalized under the HRRP.
• 70.1% of hospitals will face penalties < 1%.
• 8.1% (240) of hospitals will face penalties > 1%.
• Hospitals with the highest proportion of dual-eligible patients have an average penalty of 0.33%.
• Hospitals with the lowest proportion of dual-eligible patients have an average penalty of 0.35%.

It is anticipated payment reductions will grow in FY 2027 as Medicare Advantage beneficiaries are included in the measure population. An Advisory Board daily briefing estimates between 75% and 82% of hospitals will be penalized in 2027 with the average penalty increasing to 0.44%.