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Financial Incentive to Reduce Hospital Readmission Rates

Paper Type: Free Essay Subject: Health
Wordcount: 1900 words Published: 23rd Sep 2019

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30-Day Readmissions

In 2008, the Center for Medicare & Medicaid Services (CMS) identified the need to improve care transition and coordinate care across all hospital settings. A goal of this was to reduce preventable readmissions. In 2010, the Hospital Readmissions Reduction Program (HRRP) was established. The objective of this program was to add a financial incentive to reduce readmissions rates. “The end goal of preventing hospital readmissions is to relieve Medicare beneficiaries of the burden of returning to the hospital and to relieve taxpayers of the cost of unnecessary readmissions (Medicare Payment Advisory Commission, 2018).


In 2011, 3.3 million hospital readmissions occurred with a cost of $41.3 billion. Reducing hospital admissions was a priority for the Affordable Care Act (ACA). In attempt to decrease 30-day readmissions the Hospital Readmissions Reduction Program (HRRP) was formed. “The HRRP tracks readmissions for Medicare patients admitted initially for six targeted conditions: heart attack, heart failure, pneumonia, chronic obstructive pulmonary disease (COPD), elective hip and knee replacement, and coronary artery bypass graft (CABG)” (Hospital Readmissions Reduction Program (HRRP), 2018). The HRRP decreased Medicare payments by up to three percent for hospitals with high readmission rates from these conditions. Also, Congress dispersed funding to help hospitals to decrease readmissions and improve patients transitions of care (Medicare Payment Advisory Commission, 2018).

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“According to CMS, historically about one in five Medicare patients discharged from a hospital are readmitted within 30 days” (James, 2013). The patient that was readmitted within the 30 days, Medicare would provide decreased reimbursement or no reimbursement for that admission. Although there are many factors that influence the rate of reimbursements such as, hospital to hospital and geographic location; many of these recurrent readmissions are preventable. “An analysis of 2005 Medicare care claims data by the Medicare Payment Advisory Commission (MedPAC) concluded that about three-quarters of readmissions within 30 days were potentially preventable, representing an estimated $12 billion in Medicare spending” (James, 2013).

Legislative Impact and Implications

“The Office of the Assistant Secretary for Planning and Evaluation, which evaluated social risk factors under the hospital value-based purchasing programs, found that lower income patients did tend to have worse outcomes, but they also found that hospitals serving more lower income patients tended to have worse outcomes even after controlling for patient mix” (Medicare Payment Advisory Commission, 2018). Living in a small community with more than fifty percent dual enrolled patients of Medicare and Medicaid is a challenge for our small community hospital. It has not had a direct affect on a leadership role but as a facility in whole. Our 30-day readmission rate is unfortunately very high. Studies have shown that “community factors” such as income and availability of nearby health care increase readmission rates not the quality of care that is provided (DeBolt, 2018).

A way that is used in our hospital to help decrease readmission rates but still care for patients is placing them in observation status. Observation status is a two to three-night stay where they receive the same care as inpatient just classified as a different kind of stay. “Between 2006 and 2013, observation stays increased by 96 percent, accounting for more than half of the apparent decline in total Medicare admissions during that seven-year period” (Himmelstein & Woolhandler, 2015).

Ethical Considerations

Although over 500,000 readmissions have been prevented and hospitals have encountered nearly $2.5 billion in penalties, many factors have not been implemented into determining coverage for readmissions. Sociodemographic factors such as income, insurance status, access to pharmacies and physicians, and transportation “A Kaiser Health News analysis of FY 2013 readmissions penalties showed that hospitals serving the poorest patients were more likely to incur a penalty, and that penalty was more likely to be the maximum penalty” (American Hospital Association, 2016).

A study that was done in 2009 showed that dual-eligible patients were more likely to have a diagnosis of CHF, cancer, COPD, diabetes, arthritis, stroke, depression, and an eye disorder. Of these diagnoses CHF and COPD are two factors of the six that reduce reimbursements. This study compared urban vs rural dual eligible and urban vs rural Medicare-only eligible patients. Dual enrolled patients had a 17.8% of a higher 30-day readmission rate compared to Medicare-only patients at 16.6%. Rural dual eligible patients had lower readmission rates at 16.3% compared to their counterpart urban dual eligible patients at 18.2%. Some other factors that associated with decreased readmission rates from this study were male gender, age less than 65 years or greater than 75 years old, and not living in the Northeast (Bennett & Probst, 2016). 

Having these socioeconomic factors incorporated into the hospital readmission greatly decreases the hospitals readmission rates. Helping to protect our vulnerable patients should be our main agenda. Modifying reimbursement to help cover the cost of post discharge follow-ups and including socioeconomic factors could drastically change the readmission rates. Patients who are dual enrolled in both Medicare and Medicaid have a higher readmission rate and a high comorbidity disease rate. Having the differences in reimbursement between hospitals could help patients understand what happened during their admission and could ultimately prevent another readmission (DeBolt, 2018).

Financial Reimbursement Considerations

Having increased 30-day readmissions takes a large financial hit on hospitals. Reimbursements decrease, and admissions are on the rise. Having this program in place is especially difficult for small, rural hospitals.


Unfortunately, readmissions are very common for Medicare patients. Approximately 20% of Medicare patients are readmitted within 30 days. By starting at the time of the admission, nurses need to start planning the patients discharge by determining the readiness for discharge, having appropriate post discharge care setting, involving the patient and family in the plan of care, and coordinating with the rest of the patients care team (Nelson & Rosenthal, 2015).

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There are many programs that are being researched to help reduce readmission rates. Project RED (Re-Engineered Discharge), developed by Boston University Medical Campus (BUMC), has two key aspects of it. These keys to success are a nurse-discharge advocate assigned to follow the patient throughout the discharge process, from admission to discharge, and providing simple after discharge care. The study showed that within 30 days of using this program it decreased their readmission rates by 30% (James, 2013).

Communication is the most crucial factor that make or break readmissions. Nurses need to advocate for their patients among hospitalists, pharmacists, social services and many more. The most crucial time to increase communication is at discharge and after discharge. The patient is overwhelmed with everything that just happened and things change quickly. Following up with patients after discharge decreases the confusion of what they are supposed to be doing and helps patients stick with their discharge plan.

Nurses play a huge role in the HRRP. Some ways we play a role is coaching patients on discharge instructions and self-management, making sure patients have follow-up appointments with the appropriate physicians, perform medication reconciliation, and provide information and community resources that will help with such things as medication costs and transportation. Even though rates have dropped from 21.5% in 2007 to 17.8% in 2015 they have leveled off since then (Hospital Readmissions Reduction Program (HRRP), 2018).

 Although, the Hospital Readmissions Reduction Program (HRRP) is a great way to reduce hospital readmissions, somethings need to be taken into reconsideration and revamp the program. Additional factors such as income, insurance status, access to pharmacies and physicians, and transportation need to be included in how reimbursement is dispersed. Financial assistance should be available to hospitals to help patients decrease their readmissions by providing after discharge care to continue to educate patients on the importance of adherence to medications, lifestyle changes, follow-up appointments, and to be able to ask questions about what happened during their admission. Having all these key factors addressed will help decrease readmissions and help patients, which is the primary goal.


  • American Hospital Association (2016). AHA fact sheet: Hospital readmissions reduction program. Retrieved from https://www.aha.org/other-resources/2016-01-18-aha-fact-sheet-hospital-readmissions-reduction-program
  • Bennett, K. J., & Probst, J. C. (2016). Thirty-day readmission rates among dual-eligible beneficiaries. The Journal of Rural Health: Official Journal of The American Rural Health Association and The National Rural Health Care Association, 32(2), 188–195. doi:10.1111/jrh.12140
  • Himmelstein, D. & Woolhandler, S. (2015). Readmission penalties dodged by placing patients on observation status. Health Affairs Blog. Retrieved from pnhp.org/news/readmission-penalties-dodged-by-placing-patients-on-observation-status/
  • Hospital Readmissions Reduction Program (HRRP). (2018). Retrieved from https://catalyst.nejm.org/hospital-readmissions-reduction-program-hrrp/
  • James, Julia. (2013). Health policy brief: Medicare hospital readmissions reduction program. Health Affairs, 1-5. Retrieved from www.healthaffairs.org
  • Medicare Payment Advisory Commission. (2018). Mandated report: The effects of the hospital readmissions reduction program. Report to the Congress: Medicare and the Health Care Delivery System. (pp. 1-32). Retrieved from:  http://www.medpac.gov/-documents-/reports
  • Nagasako, E.M., Reidhead, M., Waterman, B., & Dunagan, W.C. (2014). Adding socioeconomic data to hospital readmissions calculations may produce more useful results. Health Affairs (Project Hope), 33(5), 786-91. doi:10.1377/hlthalff.2013.1148
  • Nelson, J.M. & Rosenthal, L. (2015). How nurses can help reduce hospital readmissions. American Nurse Today. Retrieved from https://www.americannursetoday.com/nurses-can-help-reduce-hospital-readmissions/


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