CMS corrects readmission penalties for second time

Medicare has once again revised its formula for calculating penalties for hospitals with excessive readmissions, essentially correcting its previous correction.

The new calculation reduces penalties for 1,246 hospitals and increases them for 226 organizations, according to Kaiser Health News, which analyzed data provided by the Centers for Medicare & Medicaid Services.

A previous correction of the formula, issued at the end of September, increased penalties for 1,422 hospitals and reduced them for 55. The revision was to cost hospitals another 0.02 percent in penalties for excessive readmissions of Medicare patients hospitalized for heart attack, heart failure and pneumonia.

Hospitals will pay $10 million less in penalties under the Hospital Readmissions Reduction Program than previously calculated, for a total of $280 million this year, according to KHN. The changes averaged 0.03 percent of each reimbursement, and are applied retroactively to Oct. 1, 2012, when the program began.

CMS posted the correction this week on its website.

The KHN analysis showed the big winner of the latest adjustment as St. Claire Regional Medical Center in Morehead, Ky., which saw its penalty drop from 0.93 percent to 0.72 percent for fiscal 2013. LaSalle General Hospital in Jena, La., is the biggest loser, with its penalty increasing from 0.65 percent to 0.84 percent.

Last fall the Medicare Payment Advisory Commission (MedPAC) estimated two-thirds of U.S. hospitals would face penalties averaging $125,000 for high readmission rates.

The readmissions reduction program itself remains controversial. Earlier this month Harvard University researchers Karen E. Joynt and Ashish K. Jha argued in the New England Journal of Medicine that the program "has the potential to exacerbate disparities in care and create disincentives to providing care for patients who are particularly ill or who have complex health needs, particularly if the penalties are larger than hospitals' margins for caring for these patients."

To learn more:
- read the Kaiser Health News article
- here's the CMS correction (.pdf)