Hospital Readmissions: How Are They Impacting Your Bottom Line?

By Tawnya Bosko, MHA, MSHL, MS, Senior Manager and Tina Pike, RN, MSN, MBA, HCM, Senior Manager, The Camden Group

Revolving DoorYes, there is controversy surrounding the Hospital Readmissions Reduction Program (“HRRP”). Many hospitals feel that the costs to effectively manage readmissions are more than the penalty that is incurred, thus making readmission reduction efforts a net loss; and still others feel that the formula is flawed and disproportionately impacts certain facilities such as academic medical centers and those hospitals serving communities of lower socioeconomic status.

While either of these scenarios may be true, the reality is that reducing readmissions is in the best interest of all hospitals as an initial step in transitioning to a more population health-based delivery system. Potentially avoidable readmissions result in approximately $17 billion in excess spending by Medicare alone. Additionally, potentially avoidable readmissions are a reflection of the quality of care provided across the continuum. Understanding your hospital’s current performance, the performance of care providers in the delivery network, and identifying solutions to reduce readmissions are of significant importance. Acting now will prevent larger revenue impacts in the future and will position the hospital for success.

Although readmission rates have been declining overall, 75 percent of all hospitals eligible for the HRRP (i.e., 2,610 hospitals) are receiving a penalty this year, which is an increase of 433 hospitals receiving penalties over the previous year. The average penalty is .63 percent of their Medicare reimbursement for every Medicare stay, not just those readmitted. Overall, the hospitals receiving penalties will experience an estimated $428 million reduction in Medicare reimbursements, with the largest readmissions penalty to any hospital being approximately $13.3 million.

While the financial implications are important, hospitals need to be aware of the data collection and reporting periods that impact their penalty. This year brings the maximum penalty allowed by law (3 percent) as well as additional measures, but the data for this year’s penalty was collected July 1, 2010 through June 30, 2013. This means that hospitals cannot impact their penalty for 2016 at this point in time and have only four months remaining to make any impact for 2017, which will bring a new diagnosis (Coronary Artery Bypass Graft [“CABG”]). Of importance is taking action now to protect revenue in 2018 and beyond.

Readmissions_Table1-resized-600If a hospital is subject to a penalty and/or attempting to improve current performance, a detailed analysis stratifying readmitted patients by payer, diagnosis, and source of the readmission should be completed in order to identify priority areas. From there, hospitals should assess the internal organizational processes related to care delivery and care management. This not only includes assuring high quality care during the hospitalization, but incorporates the preparation, planning, and communication needed for a successful transition of care to a post-acute or home-based setting. 

Determination of process effectiveness includes incorporating patient goals into discharge planning and instructions, including medication reconciliation with easy to use patient tools, as well as other tailored patient and caregiver education and programs focused on certain medical conditions. Coordination with Paths_Readmissionscommunity physicians for follow-up visits is imperative. Qualitative factors such as short patient or caregiver interviews at the time of readmission may also shed light on non-obvious reasons for readmission. Additionally, the hospitalist program should be assessed from a coordination perspective with care management, discharge planning, and primary care physicians. Paths for controlling readmissions include: pre-discharge processes internal to the hospital, performance of the post-acute network, and factors associated with discharge to home. Assessing and improving these pathways is recommended.

As the U.S. healthcare system continues its transition from volume to value, readmissions penalties appear to be here to stay. The penalties will impact each hospital in a different manner, and the costs and benefits of reduction efforts must be weighed. However, controlling and reducing avoidable readmissions is a solid first step toward delivering more accountable care. Hospitals should be aware of the penalties, the impact to their facility, and the drivers of potentially avoidable readmissions. Deploying proactive and effective strategies for improvement is necessary for success in today’s healthcare marketplace.

The Camden Group, Hospital Readmissions, Readmissions Reduction

bosko_headshotMs. Bosko is senior manager with The Camden Group and specializes in designing and implementing clinical integration, high growth medical service operations (“MSO”) and finance, physician hospital organization (“PHO”) and MSO development, managed care strategy, and physician alignment. She may be reached at or 310-320-3990.





Ms. Pike is a senior manager with The Camden Group with over 25 years of clinical, business, and management experience in the healthcare industry. Ms. Pike’s areas of expertise include business development, strategic planning, operations management, Lean strategies, and performance and process improvement. She may be reached at or 585-512-3900.



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