Nearly 80% of hospitals subject to HRRP hit with readmissions penalties

By Brian Murphy

New data just released (see Fierce Healthcare article below) shows that CMS penalized a whopping 2,334 hospitals for excess readmissions on Oct 1—nearly 80% of all hospitals subject to CMS’ Hospital Readmission Reduction Program (HRRP).

I went back and looked at Fierce’s math because I didn’t believe it. But it’s correct. 2,911 hospitals were evaluated in CMS’ supplemental data file and just 578 received no penalty.

The HRRP has no upsides, just penalties, up to 3% of your DRG payments. Too many readmissions compared to your peers? You’ll feel a financial pinch.

There were many pinches delivered across the country this month.

To be fair, most were quite small, under 1%. But some hospitals felt the sting more than others:

• 244 were penalized 1% or more
• 34 were hit with a 2% penalty
• 10 were hit with the maximum 3% penalty

A one percent cut in an era of tight margins is a lot.

Why more penalties?

For the first time ever Medicare Advantage (MA) patients were added to hospitals’ performance denominator. Financial penalties are applied to Medicare patients only … but adding MA puts a lot more patient data under scrutiny.

I suspect many hospitals prioritize Traditional Medicare chart reviews over MA for optimization of quality measures including the HRRP.

Reminder that the HRRP is widening in scope. CMS just added sepsis (Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate Following Sepsis Hospitalization measure) to the list of conditions subject to the HRRP beginning in fiscal year 2029.

While payment reductions don’t start until Oct. 1, 2028, sepsis data collection has already begun (July 1, 2025 – June 30, 2027).

Hospitals will be impacted with the addition of sepsis—and CMS has the data to prove it. Per the 2027 IPPS final rule:

“Sepsis readmissions are both high volume and high expenditure. Thirty-day average readmission rates for patients with sepsis are estimated to be about 21 percent. Sepsis is also associated with poor health outcomes, such as the development of chronic conditions and functional impairment, as well as higher costs.”

What is the HRRP?

Hospitals are penalized up to 3% of Medicare payments for higher-than-expected readmission rates for certain conditions, including acute myocardial infarction (AMI), heart failure (HF), pneumonia, COPD and others. Full list in the associated table.

The measures are designed to capture unplanned readmissions that arise from acute clinical events requiring urgent rehospitalization within 30 days of discharge. Only an unplanned inpatient admission to a short-term acute care hospital qualifies. Planned readmissions are excluded. CMS uses a planned readmission algorithm using ICD-10 coding on the readmission to identify admissions that are typically planned and may occur within 30 days of discharge from the hospital.

Details including inclusions, exclusions, and specific ICD-10 codes are included in the CMS QualityNet link below.

References

• CMS, HRRP: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/hospital-readmissions-reduction-program-hrrp
• Becker’s, CMS penalizes 2,334 hospitals for high readmissions: 6 things to know: https://www.beckershospitalreview.com/finance/cms-penalizes-2334-hospitals-for-high-readmissions-6-things-to-know/
• CMS QualityNet, Additional resources on the measure technical specifications and methodology: https://qualitynet.cms.gov/inpatient/measures/readmission/methodology