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Will The Readmission Rate Penalties Drive Hospital Behavior Changes?


February 14th, 2013

Since the development of the metric in 1984 by Anderson and Steinberg, inpatient hospital readmission rates have been used as a marker for hospital quality. A good deal of attention is now being paid to the new readmission rate penalties in the Affordable Care Act (ACA).

While the penalties have garnered significant attention, it is unknown whether they will materially change hospital behavior. In this post, after reviewing the mechanics of the penalties, we take a close look at how they are likely to affect hospital incentives. We also suggest some refinements to the penalties that could help achieve the aim of reducing preventable readmissions.

How The Penalties Work

The readmission penalty in the ACA is based on readmissions for three conditions: Acute Myocardial Infarction (AMI), Heart Failure, and Community Acquired Pneumonia. For each hospital, the Centers for Medicare and Medicaid Services (CMS) calculates the risk-adjusted actual and expected readmission rates for each of these conditions. Risk-adjustment variables include demographic, disease-specific, and comorbidity factors. The excess readmission ratio is the actual rate divided by the expected rate.

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