CMS Hospital Readmission Program: Penalties Announced

Gloryanne Bryant, RHIA, CDIP, CCS, CCDS Revenue Cycle Leave a Comment

CMS Hospital Readmission Program: Penalties Announced

Back in October 2012 (which is fiscal year 2013) the Hospital Readmission Reduction Program or HRRP was started in accordance with Section 1886(q) of the Social Security Act. This regulation set forth the statutory requirements for HRRP, which required the U.S. Department of Health and Human Services (HHS) via the Centers for Medicare and Medicaid Services (CMS) to reduce payments to subsection (d) hospitals for excess readmissions and is considered a ”value-based purchasing” program. In addition to this, the 21st Century Cures Act also directs CMS to assess a hospital’s performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and full Medicaid benefits. The Cures Act changed the way CMS calculates payment reductions from using a non-stratified methodology (FY 2013 to FY 2018) to a stratified methodology (FY 2019 and onward). The stratified methodology assesses hospitals’ performance relative to that of other hospitals, specifically those with a similar proportion of patients who are dually eligible for Medicare and full Medicaid benefits.

Per the CMS website, CMS calculates the payment reduction and component results for each hospital based on its performance during a rolling performance period. The payment adjustment factor is the form of the payment reduction CMS uses to reduce hospital payments. Payment reductions are applied to all Medicare fee-for-service base operating diagnosis-related group payments during the FY (October 1 to September 30). The payment reduction is capped at 3 percent (that is, a payment adjustment factor of 0.97).

October 2021, CMS released the latest hospital readmission penalties (10th annual round of reduced payments). CMS used patient data from July 2017 through December 2019 and compared each hospital's reported readmission rate to national averages in order to determine the penalties, the results were that 2,545 out of 5,267 hospitals have too many Medicare patients readmitted within 30 days. However, there was 82% of hospitals out of 3,080 who were actually accessed for readmission data. This represents half of the hospitals nationwide; the average reduction is 0.64%, with some hospitals receiving a penalty of up to 3% (39 hospitals receiving the maximum) which is applied to the admission payments. The reduction in payments (penalties) begin with the start of October 2021 through September 2022. CMS is estimating they will save Medicare $521 million in the next fiscal year.

The Centers for Medicare and Medicaid Services includes readmission measure for specific conditions (diagnosis) or procedures that significantly affect the lives of Medicare patients as a link to payment for quality hospital care. CMS includes the following six conditions or procedure-specific 30-day risk-standardized unplanned readmission measures in the program:

  • Acute myocardial infarction (AMI)
  • Chronic obstructive pulmonary disease (COPD)
  • Heart failure (HF)
  • Pneumonia
  • Coronary artery bypass graft (CABG) surgery
  • Elective primary total hip arthroplasty and/or total knee arthroplasty (THA/TKA)

Information can also be found in the Federal Register from September 2, 2020, at:

Be sure to visit the following link: Hospital Readmissions Reduction Program (HRRP) Overview (

There is a great opportunity for hospitals to review their HRRP data and submit questions as well identify possible corrections. CMS has a payment “Review and Correction Process.” There are confidential Hospital-Specific Reports or HSRs. Hospitals have 30 days to CMS gives hospitals 30 days to review their HRRP data as reflected in their HSR under CMS rules. It should be noted that for fiscal year (FY) 2022, the 30-day Review and Correction period extends from August 9, 2021, to September 8, 2021. Go to the following link to learn more about the Review & Correction Process: Hospital Readmissions Reduction Program (HRRP) Payment ( The CMS frequently asked questions (FAQ) section for HRRP:

Acute care hospitals should run some inpatient data on the diagnostic conditions within the HRRP. Look carefully for readmissions within 30 days of the prior admission. Of course accurate coding for these conditions is important, so include a documentation and coding validation process as well in the assessment of your own HRRP.

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