Pat Stricker, RN, MEd

Senior Vice President

A few months ago I wrote an article entitled Unplanned Readmissions: Are They Quality Measures or Utilization Measures? It explained the Hospital Readmissions Reduction Program (HRRP) that began in October 2012 as part of the Affordable Care Act (ACA). That article explained the program and its results over the past 5 years. However, more and more healthcare leaders and organizations are beginning to question whether HRRP is a valuable program or whether it is time to move on to something that focuses on quality of care and clinical outcomes, rather than cost savings. This article will address those issues. (In this article “readmissions” mean unplanned or preventable readmissions). 

In case you did not read the previous article, let me start by providing a short review of HRRP and its results to date. HRRP was created to reduce the number of “excess readmissions” in hospitals that receive payment from the Centers for Medicare and Medicaid Services (CMS) using the Inpatient Prospective Payment System (IPPS). The IPPS payments are based on a diagnosis-related group (DRG) that covers the inpatient stay, as well as outpatient diagnostic and admission-related outpatient non-diagnostic services provided by the institution on the date of the patient’s admission or within 3 days immediately preceding the admission date. However, they do not include post-discharge care or interventions, so IPPS hospitals had no financial incentive to reduce the incidence of readmissions. Prior to 2012 nearly 20% of all Medicare discharges had a readmission within 30 days, costing taxpayers $15 billion a year. It was estimated that 12% of readmissions were potentially avoidable, so preventing even 10% of those would save Medicare $1.5 billion annually. These costs focused attention on the need to reduce readmissions, resulting in the reduction of readmissions becoming a national priority. As a result, the ACA required CMS to reduce readmission rates and CMS developed HRRP in a way that incentivized hospitals to become part of the process, by offering them direct financial incentives for reducing their “excess readmissions”.

Although HRRP was called an incentive program when it was implemented, it has not been seen as a positive incentive program. Instead, it is seen as a negative penalty program, because hospitals are not rewarded for reducing their readmissions, but are penalized if they have higher than expected readmission rates. About 80% of the hospitals have received penalties (1-3% deducted from their CMS payments). These penalties then become CMS’ “cost savings”.

Over the past 5 years, the program has shown cost savings, but it has not shown the savings predicted. The total cost savings (penalties) over the past 5 years amounted to $1,893,000 billion. While this is a sizable amount, it is much less than the $7.5 billion ($1.5 billion each year) that was predicted when the program was created. However, from October 2007 to May 2015 it has reduced the risk-adjusted readmission rates on the targeted conditions by 3.7% (from 21.5% to 17.8%). Because of the focus placed on reducing the targeted readmission rates, the rates for non-targeted conditions have also declined during this time period by 2.2% (from 15.3% to 13.1%). The most rapid decline actually occurred between 2010, when the ACA was passed, and 2012 when HRRP began. This shows that the discussion and focus on the issue had a broad affect, creating reductions in readmissions even before major program initiatives were begun.

(Click to Enlarge)

Source:  Readmissions, Observation, and the Hospital Readmissions Reduction Program


While proponents argue that this program has been very successful, critics feel that it should be doing more. It has provided savings, but it did not come close to meeting the expectations. Critics are advocating that we take what has been learned and devote the time, money, and resources needed to develop positive, incentive programs that focus on achieving improved clinical quality and patient outcomes. They feel HRRP is a good foundation for a cost savings program, but cost cannot (and should not) be our main driving force. Improving the quality of patient care is essential and should always be the ultimate goal. It is now time to re-focus and move on to improve the quality of care.

So what have we learned from HRRP that we can use to improve the current program and develop future programs?

Some critics feel that a detailed analysis of patient charts is needed to truly identify and analyze preventable readmissions. They feel CMS’ program only looks as high level administrative data, which cannot get to the root cause of unintended consequences or quality issues. Two such studies were conducted comparing hospital readmission rates with mortality rates. They both found small, but significant, associations between readmissions and mortality, although they came from opposite perspectives. One found increased readmissions were associated with increased mortality, while the other found decreased readmissions were associated with decreased mortality.

·         A study conducted at The Johns Hopkins Hospital examined nearly 4,500 acute-care hospitals’ readmission records and compared them with the hospitals’ mortality rates in six areas used by CMS: heart attack, pneumonia, heart failure, stroke, chronic obstructive pulmonary disease, and coronary artery bypass. The study found a small, but significant, association between increased mortality rates and increased readmissions. The study stressed that the data showed that readmissions have no role in quality measure assessments and should not be a Five-Star Rating. Readmissions, just like length of stay, should be considered a utilization measure, not a quality measure.

·         Another study conducted by Yale New Haven Health researchers looked at over 6,000,000 hospitalizations to see if readmissions had any unintended consequences of increasing post-discharge mortality. Their data showed similar results, but from a different perspective. They found that reductions in readmission rates were weakly, but significantly, correlated with reductions in hospital mortality rates after discharge.

While these two studies concluded that this level of detailed analysis of patient records is needed to identify these root causes, it is very difficult to imagine that this would be possible in a system as large as the national Medicare program. However, it seems logical that some detailed analytics are needed and should be part of the program.


Looking back at the past 5 years of HRRP has provided the opportunity to assess what has worked and what has not worked. The following are lists of the PROs and CONs of the program, as well as recommendations made by different organizations and published studies.


  1. HRRP has saved almost $2 billion ($1,893,000 billion) over the past 5 years.
  2. Hospitals and care providers across all areas of the healthcare spectrum have been very engaged in the process.
  3. HRRP identified and reinforced the need for and importance of transition of care in the patient discharge process. This includes increased collaboration and communication among the healthcare team members and making sure the patient and caregivers are involved and understand their expectations.
  4. Numerous care programs, goals, strategies, best practices, and innovative approaches have been developed and shared throughout the industry.
  5. Data seems to show that most readmissions are not due to defects in care by the provider or hospital or by things that should have been done by the provider or hospital. They are more commonly due to the patient’s illness, their quality of outpatient care, and/or their engagement and follow-though.
  6. Focusing on the causes for readmissions helps identify specific care defects that could lead to readmissions and allows an opportunity to develop interventions to manage these defects before they create a readmission.
  7. The program has moved from process measures to patient-centric outcome measures with focus on the patient, caregivers, family, and payers. This provides better overall performance and avoids a “one-size-fits-all” solution.
  8. HRRP has provided a good foundation and bridge to build other programs focused on quality and patient outcomes, as well as cost savings.


  1. There is a potential to disproportionately penalize hospitals that care for vulnerable populations.
  2. We need to be aware of the potential to reduce necessary readmissions, which could cause untoward negative outcomes and increase mortality.
  3. There is a potential for unintended consequences of readmission, if the strategies and processes are not well thought through.
  4. Using Observation (“Clinical Decision”) Units can lead to inappropriate patient selection, prolonged observation time, and increased out-of-pocket expenses for the patient, if they then need admission to a skilled nursing facility.
  5. Patients experience stress and vulnerability during the hospital stay, which can cause acquired post-hospital syndrome. Focus needs to be placed on this, the same as it is on transition of care.



  1. 12% of readmissions are clearly preventable. Root cause analysis should be done on those readmissions to identify specific care defects and develop interventions that will help prevent these defects from causing future readmissions. This level of analysis needs to be done using patients’ charts, not high level administrative data, as is being done currently.
  2. Episodes of care should be looked at as part of the continuum of care, rather than considering discharge as the end of an episode. Transition of care processes and continued follow through are essential.
  3. Continuity of care consists of and must focus on inpatient care, transition of care, and early outpatient follow-up.
  4. The data from two studies showed a small, but significant, association between readmissions and mortality rates. One study concluded that readmissions have no role in quality measure assessments. Readmissions, just like length of stay, should be considered a utilization measure, not a quality measure.
  5. HRRP should move from a limited number of specific targeted conditions to “all causes” for readmissions. This will allow further reductions for all other conditions and situations, including co-morbid, psychiatric, social, and environmental conditions.
  6. Medicare should continue to move to an outcome-based payment model, like those being developed in the Accountable Care Organizations (ACOs). Its goal is to move 90% of all fee-for-service payments to value-based programs or the bundled-payment initiativeby 2018.
  7. The program needs to risk-adjust for socio-economic issues, however they need to be careful not to go so far as to mask disparities in care or penalize hospitals that care for these patients.
  8. Transitions of care and hospice services have been proven to be effective in reducing the needs for readmission.
  9. Different time frames or scored rankings should be considered rather than using a strict 30 day time frame. Readmissions occurring within the first week after discharge may be more significant and are likely to be because of poor care coordination or inaccurate assessment of discharge needs. Those occurring later in the 30 day period are more likely to occur because of the severity of the patient’s illness.
  10. Necessary and unnecessary readmissions should be looked at separately and in aggregate reports to identify potential preventable events.
  11. Technological tools should be increased to provide more clinical detail, which will lead to more targeted assessments of readmissions and better risk-adjustments.
  12. Successful programs, goals, strategies, best practices, and innovative approaches should continue to be shared within the healthcare community.
  13. Targeted processes and effective patient-centric interventions need to be developed to improve care and patient outcomes.
  14. Financial incentives need to be realigned to better reward providers.
  15. HRRP is a start. It validates the process is necessary and should be ongoing.


As you can see, reducing readmission rates is not a simple issue. HRRP has produced good results over the past 5 years and cost savings programs are definitely important, since our healthcare spending is extremely high. However, improving the quality of care and patient outcomes are just as critical and essential.

The focus going forward should be on rewarding organizations for improving quality and achieving optimal patient outcomes, rather than focusing on financial programs with penalties that also might provide some level of positive clinical outcomes.

It is extremely difficult to effect change in something as large as the Medicare system, yet HRRP has made significant advances over the past 7 years since it was created. It has proved to be a necessary complement to the IPPS-DRG system, but its goal now is to be a bridge to get from fee-for-service payments to value-based or bundled payment initiatives being developed in Accountable Care Organizations. We are ready for the next steps in this journey.