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County-Level Variation in Readmission Rates: Implications for the Hospital Readmission Reduction Program's Potential to Succeed

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The Centers for Medicare and Medicaid Services (CMS) implemented the Hospital Readmissions Reduction Program (HRRP) in fiscal year 2013 (i.e., October 2012). This policy creates financial penalties for hospitals with higher-than-expected 30-day risk-adjusted readmission rates for adults age 65 years and older. In the program's first year, conditions included heart failure, myocardial infarction, or pneumonia (MedPAC 2013; U.S. Centers for Medicare and Medicaid Services 2014); penalties represented up to 1 percent of hospitals' aggregate Medicare payments for all discharges; and 70 percent of hospitals incurred a penalty. The mean reduction in aggregate Medicare payments among affected hospitals was 0.31 percent (MedPAC 2013), a sizeable amount given that patients with Medicare represent 40 percent of hospital discharges (AHRQ 2011), and hospitals' mean aggregate operating margins have been about 5.5 percent in recent years (American Hospital Association 2013). In 2014, the maximum HRRP penalty doubled to 2 percent. In 2015, it will increase to 3 percent (MedPAC 2013; U.S. Centers for Medicare and Medicaid Services 2014), and two categories of conditions will be added: acute exacerbations of chronic obstructive pulmonary disease and admissions for elective total hip arthroplasty and total knee arthroplasty. CMS has proposed adding coronary artery bypass grafting in future years (Department of Health and Human Services 2014).

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