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Hospital Readmissions Reduction Program: What to Know About HRRP

Did you know that at least 25% of hospital readmissions are believed to occur because of patient disengagement and medication noncompliance (i.e., nonadherence), and about 30% of readmissions are believed to be avoidable? The Hospital Readmissions Reduction Program (HRRP) was developed to help address such issues while aiming to lower mortality rates, boost patient satisfaction, and incentivize providers and care staff to provide better discharge plans and follow-ups.  

In this piece, we take a closer look at HRRP, including what it is, what it measures, and the payment reduction a hospital could face if it has worse-than-average readmission rates.

How the Hospital Readmissions Reduction Program Works

In the United States, the annual cost of hospital readmissions is estimated to exceed $52 billion. The Hospital Readmissions Reduction Program (HRRP), established in 2012, is a Medicare value-based purchasing program designed to help combat excessive and costly readmissions with a focus on encouraging hospitals to improve their communication and care coordination efforts.

This program is incentive-based for the facility and the communities it serves because with reduced readmission rates and better clinical condition management, HRRP penalties can be reduced or avoided. HRRP financially penalizes hospitals by decreasing Medicare payments up to 3% for hospitals if they have higher than expected risk-standardized 30-day readmission rates for specific conditions such as acute myocardial infarction, heart failure, or pneumonia. Thus, the hospital administration is financially interested in reducing patients' readmission to the hospital after discharge.

The Centers for Medicare & Medicaid Services (CMS) uses the excess readmission ratio (ERR) to assess a hospital's readmission performance. ERR is a ratio of predicted-to-expected readmission rates. The excess readmissions ratio is calculated by comparing up to three full previous years of a hospital's readmission data with readmissions for other hospitals that are similarly situated.

HRRP 30-day risk-standardized unplanned readmission measures include:

  • Unplanned readmissions that happen within 30 days of discharge from the index (i.e., initial) admission
  • Patients who are readmitted to the same hospital or another applicable acute care hospital for any reason

For each eligible hospital, CMS calculates the payment adjustment factor, which corresponds to the percent a hospital’s payment is reduced. The payment adjustment factor is a weighted average of a hospital’s performance across the readmission measures during the HRRP performance period.

How measurement works will depend on the initial measurement and the breakdown of different conditions associated with readmissions. The principal diagnosis isn't always the determining factor, and the hospital-wide all-cause readmission (HWR) measurement is not included within HRRP. There is a maximum payment penalty cap of 3%, with the penalty percentage ranging from 1% to 3% based on the condition being targeted.

Measurements and Target Conditions HRRP Tracks

There are six primary conditions included in a 30-day risk measure for unplanned readmissions. These conditions are as follows:

  • Pneumonia
  • Heart failure
  • Coronary artery bypass graft (CABG)
  • Primary total hip or knee arthroplasty; elective (THA/TKA)
  • Acute myocardial infarction (AMI)
  • Chronic obstructive pulmonary disease (COPD)

Various factors beyond a hospital’s control increase the likelihood of readmission, including poverty rates, lack of access to supportive services in a community, or a lack of patient participation in care plans. HRRP is currently designed to adjust for certain demographic characteristics before comparing readmission rates.

Examples of initiatives hospitals can take to reduce the impact of factors outside of their control are improving medication management and reconciliation, strengthening patient education efforts, and emphasizing care transitioning, especially with specialist and out-of-network facilities.

Why Else Is HRRP Important?

The financial implications of HRRP, as touched on earlier, are notable due to Medicare playing such a significant role in the U.S. healthcare system, accounting for 21% of total national health spending in 2021.

The impact on individual hospitals has been substantial. More than 1,200 hospitals have faced penalties for preventable hospital readmissions every year since the launch of HRRP.

According to RevCycle Intelligence, the average penalty for the fiscal year 2022 was 0.64%, with some hospitals reporting reimbursement cuts up to 3%, the maximum allowable. According to the Medicare Payment Advisory Commission (MedPAC), the average hospital fine in 2018 due to HRRP was $217,000.

HRRP Criticisms and Concerns

HRRP is meant to improve Americans’ healthcare by linking payment to the quality of hospital care. But controversy surrounds the HRRP with claims that it unfairly punishes certain hospitals.

This main criticism HRRP receives is it provides inadequate consideration of socioeconomic status and unfairly targets safety-net hospitals, rural hospitals, and health systems that provide care for vulnerable populations. As such, those patients may be associated with higher levels of poor health outcomes and readmission rates.

CMS implemented a system to help combat this issue through the stratification payment adjustment model. This model allows for a decrease in penalty rates for more rural and marginalized hospitals and communities by comparing these hospitals to similar ones rather than national hospital performance. For this model, CMS stratified hospitals into five groups depending on their number of dual-eligible patients.

RevCycle Intelligence reports that “before stratification, approximately 34% of safety-net hospitals were penalized, compared to 25% after stratification, leading to a net savings of $32 million. Safety-net hospitals that treat patients with highly medically complex conditions had greater odds of moving from penalized to nonpenalized status.”

In addition to concerns about the inequitable effects of the HRRP on certain hospitals, some clinicians have expressed concerns that the incentives to avoid readmissions could result in potentially improper management of higher-risk patients with chronic conditions that could benefit from inpatient care.

HRRP Benefits and Results

As part of the Affordable Care Act (ACA), HRRP has provided hospitals with direct financial incentives to reduce their excess readmissions. Studies indicate that hospitals can save anywhere between $10,000 to $58,000 in reimbursement for avoiding a single preventable readmission to the hospital after discharge.

HRRP has had some positive outcomes, both locally and nationally. According to a report from BMC Health Services Research, “Studies have found an overall decrease in readmission rates, positive spillover effects when it comes to non-targeted conditions and patients not on Medicare, as well as ‘no evidence that hospitals delay readmissions, treat patients with greater intensity, or alter discharge status in response to the HRRP’ and no significant differences between not-for-profit and proprietary hospitals.”

Other studies question the cause-and-effect link between HRRP and reduced readmission rates. In the Journal of American Medicine Open Network, one author asserts that “the outcomes of HRRP regarding readmissions have been less than originally reported. We noted that more than half of the absolute decreases in readmission rates for target conditions was attributable to observation stays.”

One thing that is not in question? Improving clinical care practices is at the core of readmission reduction. Some of the top methods used to better care include developing a hospital readmission reduction program that identifies risk factors before a readmission occurrence, improves compliance rates for better medication management, and strengthens transitional care.

Reducing Hospital Readmissions: The Power of Effective Transitional Care

Medication-related readmissions account for about 16% of all readmissions, and 40% of these may be avoided with more attention given to medication-related issues, according to a study in Frontiers in Pharmacology. Most of the medication errors in this study were classified as non-adherence and prescribing errors, followed by transition errors.

A key component of any readmission reduction program is proper transitions of care that include effective medication management and often include the critical-but-often-overlooked process of medication reconciliation post-discharge (MRP). Learn more about how Cureatr can help your organization greatly reduce readmissions and strengthen care quality and safety with our comprehensive medication management services

Improving Patient Care and Quality Ratings With Medication Management


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