Readmissions Reduction Program

Background

Section 3025 of the Affordable Care Act added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires CMS to reduce payments to IPPS hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. The regulations that implement this provision are in subpart I of 42 CFR part 412 (§412.150 through §412.154).

Readmissions Measures

In the FY 2012 IPPS final rule, CMS finalized the readmission measures for Acute Myocardial Infarction, (AMI) Heart Failure (HF) and Pneumonia (PN) and the calculation of the excess readmission ratio, which will then be used, in part, to calculate the readmission payment adjustment under the Hospital Readmissions Reduction Program. CMS defined readmission as an admission to a subsection(d) hospital within 30 days of a discharge from the same or another subsection(d) hospital. CMS finalized the calculation of a hospital’s excess readmission ratio for AMI, HF and PN, which is a measure of a hospital’s readmission performance compared to the national average for the hospital’s set of patients with that applicable condition. CMS established a policy of using the risk adjustment methodology endorsed by the National Quality Forum (NQF) for the readmissions measures for AMI, HF and PN to calculate the excess readmission ratios.  The excess readmission ratio includes adjustment for factors that are clinically relevant including patient demographic characteristics, comorbidities, and patient frailty. Finally, CMS established a policy of using three years of discharge data and a minimum of 25 cases to calculate a hospital’s excess readmission ratio of each applicable condition. For FY 2013, the excess readmission ratio is based on discharges occurring during the 3-year period of July 1, 2008 to June 30, 2011.  For more information on the readmissions measures, please refer to the FY 2012 IPPS Final Rule in the Downloads section below.

Payment Adjustment

CMS continues implementation of this program in the FY 2013 IPPS rule. In the FY 2013 IPPS final rule, CMS finalized which hospitals are subject to the Hospital Readmissions Reduction Program, the methodology to calculate the hospital readmission adjustment factor, what portion of the IPPS payment will be used to calculate the readmission adjustment amount and CMS has established a process for hospitals to review their readmission information and submit corrections to the information before the readmission rates are to be made public. For more information on these  payment-related policies, please refer to the FY 2013 IPPS Final Rule in the Downloads section below.

Formulas to Calculate the Readmission Adjustment Factor

For supplemental information on the readmission measures, please refer to the Related Links section below.