The 2019 Medicare Readmission Penalty

In September, CMS released the financial penalties that hospitals will pay for excessively high percentages of readmissions within 30 days of discharge. This is an annual event when hospitals get to find out how much their reimbursement from Medicare will be cut the next year. CMS focuses on 6 diagnoses when calculating the readmission penalty:

  1. COPD
  2. Coronary artery bypass surgery
  3. Myocardial infarction
  4. Heart failure
  5. Knee and hip replacement surgery
  6. Pneumonia

CMS looks at readmission data from July 2014 through June 2017. The penalties go into effect October 2018 and continue through September 2019. This year, 3,173 hospitals were evaluated and 2,599 (82%) were penalized. Certain classes of hospitals were exempt from evaluation including children’s hospitals, Veterans hospitals, hospitals in the State of Maryland, psychiatric hospitals, and critical access hospitals.

In the past, hospitals that take care of low income patients were penalized more than hospitals that take care of high income patients. For that reason, safety net hospitals and academic hospitals tended to get penalized more highly than other hospitals, in other words, hospitals got penalized for taking care of the poor. CMS overcame some of the limitations of previous years’ penalties by comparing hospitals to other hospitals that have similar patient demographics, rather than comparing all hospitals in the U.S. together. They calculated the number of dual eligible patients (those who have both Medicare and Medicaid) divided by the total number of Medicare patients. Because dual eligible patients are generally lower income than patients with Medicare only, this permitted CMS to compare hospitals that care for similar percentages of low income patients This is an improvement over previous calculations since lower income patients have higher 30-day readmission rates regardless of how good or bad their care was during their initial hospitalization. CMS stratified hospitals into 5 groups based on this calculation. Group 1 had 0-15% dual eligible patients whereas group 5 had 30-100% dual eligible.

The total amount of the penalties for next year is $566,000,000. Hospitals can be penalized a maximum of 3% of their entire Medicare revenues for that fiscal year but nationwide, the average penalty was 0.70%. There are 47 hospitals that incurred the maximum 3% penalty: Texas having the most at 8 hospitals, followed by Louisiana, Missouri, and Kentucky with 4 hospitals each. Here in Central Ohio, our hospitals all did quite well with only minimal penalties:

  1. Dublin Methodist – 0.03%
  2. Ohio State University – 0.06%
  3. Riverside Methodist – 0.17%
  4. Mt. Carmel West – 0.17%
  5. Grant – 0.23%
  6. St. Ann’s – 0.23%
  7. Doctor’s – 0.44%

States that expanded Medicaid have more hospital closures than states that did not expand Medicaid so one might hypothesize that hospitals in Medicaid expansion states would have more financial resources to put into reducing readmissions. So, I spent a few hours with an Excel spreadsheet of the 2019 Medicare penalties for all hospitals in the U.S. and it turns out that there was no difference in the average penalty incurred by hospitals in Medicaid expansion states versus hospitals in non-Medicaid expansion states.

So, overall, next year’s readmission penalties will be more fair than last year’s. But hospitals cannot control everything that a patient does or does not do once they leave the hospital and so the responsibility for fully reducing 30-day readmissions cannot lie solely on the hospitals.

November 24, 2018