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Readmissions Reduction Program (HRRP)

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).

News on the Hospital Readmissions Reduction Program

CMS has posted the FY 2018 IPPS/LTCH PPS final rule. For more information on these policies, please refer to the FY 2018 IPPS Final Rule in the Downloads section below.

Finalized Policies

In the FY 2018 IPPS final rule, CMS finalized the following policies:

  • Changed the methodology to calculate the payment adjustment factor in accordance with the 21st Century Cures Act to assess penalties based on a hospital’s performance relative to other hospitals treating a similar proportion of Medicare patients who are also eligible for full Medicaid benefits (i.e. dual eligible) beginning with the FY 2019 program.
  • Updated the ECE policy to allow facilities or hospitals to submit a form signed by the facility or hospital’s CEO or designated personnel and to allow CMS to grant ECEs due to CMS data system issues which affect data submission.

Archived Finalized Policies

For information on previous Hospital Readmissions Reduction Program finalized policies, please click on the link below:

FY 2012 – FY 2017

Payment Adjustment Non-Stratified Methodology (FY 2013 – FY 2018)

CMS measures hospital performance in the HRRP by calculating excess readmission ratios (ERRs) for each of the six program measures. An ERR is the ratio of predicted-to-expected readmissions for a given measure. Under the non-stratified methodology, measures with 25 or more eligible discharges and an ERR greater than 1.0 enter the payment adjustment factor formula. The threshold of 1.0 is applied to all hospitals, and an ERR greater than 1.0 indicates that a hospital performed worse than the average performance of all hospitals. The payment adjustment factor formula is used to calculate the size of the payment reduction. Payment reductions were capped at 1% (i.e. a minimum payment adjustment factor of 0.99) for FY 2013, 2% for FY 2014 (i.e. a minimum payment adjustment factor of 0.98) and 3% (i.e. a minimum payment adjustment factor of 0.97) for FY 2015 and onward. Payment reductions are applied to all Medicare FFS base operating DRG payments for the fiscal year.

Payment Adjustment Factor FY 2013-FY 2018

Payment Adjustment Factor Fiscal Year 2013 through 2018

Where dx is any one of the six measure cohorts: acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), coronary artery bypass graft (CABG) surgeries, and elective primary total hip and/or total knee arthroplasty (THA/TKA), the excess readmission ratio (ERR) is a hospital’s performance on that measure, and payment refers to base operating DRG payments.

Stratified Methodology (FY 2019)

Beginning in FY 2019, hospital performance in the HRRP is assessed relative to the performance of hospitals within the same peer group. Hospitals are stratified into five peer groups, or quintiles, based on the proportion of dual-eligible stays. A hospital’s dual proportion is the proportion of Medicare fee-for-service (FFS) and Medicare Advantage stays where the patient was dually eligible for Medicare and full-benefit Medicaid. The median ERR of hospitals within the peer group is used as the threshold to assess hospital performance on each measure. The median peer group ERR varies by measure and replaces the 1.0 threshold used to assess hospital performance under the non-stratified methodology. Measures with 25 or more eligible discharges and an ERR above the peer group median ERR enter the payment adjustment factor formula. A neutrality modifier is applied to scale payment adjustments in order to retain a similar amount of Medicare saving under the stratified and non-stratified methodologies. The payment adjustment factor formula is used to calculate the size of the payment reduction. The payment reduction is capped at 3% (i.e. a minimum payment adjustment factor of 0.97). Payment reductions are applied to all Medicare FFS base operating DRG payments for the fiscal year.

Payment Adjustment Factor

Payment Adjustment Factor

Where dx is any one of the six measure cohorts: acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), coronary artery bypass graft (CABG) surgeries, and elective primary total hip and/or total knee arthroplasty (THA/TKA), the excess readmission ratio (ERR) is a hospital’s performance on that measure, NM is the neutrality modifier, and payment refers to base operating DRG payments.


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

Supplemental data files from FY 2013 to FY 2018 are now available from the HRRP Archives page.

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