CMS Penalties

On March 23, 2010, when President Obama signed into law comprehensive healthcare reform legislation, the Patient Protection and Affordable Care Act (ACA), it included a provision to reduce Medicare payments to certain hospitals with relatively high preventable readmissions rates.

Under Medicare’s Inpatient Prospective Payment System (IPPS), as included in the (ACA), there will be adjustments to payments made for excessive readmissions in acute care hospitals. The government estimates about 2,200 hospitals will meet with penalties averaging $125,000 this coming fiscal year, which began Oct. 1.

Appropriate exclusions for readmissions unrelated to the prior discharge, such as planned admissions or hospital transfers, are included in the law. The law also targets certain areas of excessive hospital readmission as identified by Medicare and developed in conjunction with the National Quality Forum. The names of facilities fined under the law are to appear on the U.S. Dept. of Health & Human Services Hospital Compare website.

In 2005, the Medicare Payment Advisory Commission (MedPAC) reported that 17.6% of hospital admissions resulted in readmissions within 30 days of discharge; 11.3% within 15 days; and 6.2% within seven days, according to the Center for Medicare Advocacy. 

In 2007, MedPacidentified seven conditions and procedures that accounted for almost 30% of potentially preventable readmissions, including  heart failure;

  • chronic obstructive pulmonary disease;
  • pneumonia;
  • acute myocardial infarction;
  • coronary artery bypass graft surgery;
  • percutaneous transluminal coronary angioplasty; and 
other vascular procedures.

Based on the work of MedPac, the ACA focuses initially on three conditions: heart attack, heart failure and pneumonia. In 2015, the policy expands to include COPD, CABG, PTCA and other vascular conditions, as identified by MedPAC in its June 2007 report.

According to the Congressional Research Service (CRS), reductions in hospital readmissions were identified by Congress and President Obama as a source for reducing Medicare spending in 2010. In addition, according to the CRS report, “Medicare Hospital Readmissions: Issues, Policy Options and PPACA,” variations in readmission rates by hospital and region suggested some hospitals were better than others at containing readmission rates.

While no one path exists for all facilities to readmissions, some researchers and other experts asserted in the CRS report that relatively high readmission rates may be due to a number of factors, including:

  • inadequate relay of information at discharge to patients, caregivers, and post-acute care providers;
  • poor patient compliance with care instructions;
  • inadequate follow-up care from post-acute and long-term care providers;
  • variation in hospital bed supply;
  • insufficient reliance on family caregivers;
  • the deterioration of a patient’s clinical condition; and
  • medical errors.