For over a decade, hospitals have aimed to reduce repeat inpatient stays, partly due to the federal Hospital Readmissions Reduction Program (HRRP). This program reduces Medicare reimbursements for hospitals with higher-than-expected readmission rates for specific conditions.
A University of Michigan study has identified that some hospitals incur inflated readmission penalties. This issue arises because these hospitals serve a higher percentage of older adults enrolled in Medicare Advantage (MA) plans, which are run by private insurance companies.
Currently, the federal government evaluates hospitals solely on readmission performance for beneficiaries with traditional Medicare. Data from Medicare Advantage are not included in penalty calculations. This omission is significant because Medicare Advantage enrollees typically exhibit better health profiles than traditional Medicare beneficiaries. The HRRP's risk-adjustment mechanism does not adequately capture these differences.
Researchers found that hospitals treating fewer traditional Medicare beneficiaries and more Medicare Advantage enrollees often appear to perform worse, even when their efforts to prevent readmissions are comparable to other hospitals. The study, published in JAMA Network Open, indicates that excluding Medicare Advantage data leads to an unwarranted redistribution of nearly $300 million annually in readmission penalties across U.S. hospitals. This sum represents over half of the total annual readmission penalties.
The Centers for Medicare and Medicaid Services (CMS) has issued a rule to begin incorporating Medicare Advantage data into the program. However, this rule's full impact on hospital penalties will not be seen for several years after its effective date later this year.
Senior author Geoffrey Hoffman noted that the rapid growth of Medicare Advantage enrollment has not been fully accounted for in Medicare payment policies based on traditional Medicare enrollment. This omission highlights persistent issues in accurately measuring patient risk within the HRRP, affecting the penalties hospitals face.
When the HRRP commenced in 2012, 29% of eligible individuals chose Medicare Advantage plans; today, this figure stands at 54%, with uneven distribution nationwide. The study observed that hospitals in areas with higher Medicare Advantage enrollment were more likely to be larger, nonprofit, teaching-oriented, and located in urban areas.
Researchers also found that areas with higher Medicare Advantage enrollment might result in a higher-risk traditional Medicare beneficiary pool, as healthier individuals may migrate to Medicare Advantage plans. The current CMS data models cannot capture these risk differences, thereby exposing hospitals with more Medicare Advantage patients to greater, unmerited readmission penalties.
While the new CMS policy will add Medicare Advantage data and change the penalty calculation basis to two years of data instead of three, concerns exist regarding data completeness and accuracy. Researchers suggest that CMS could also consider factoring the percentage of Medicare Advantage enrollees in a hospital's service area or patient base into readmission rate and penalty calculations.