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HRRP-Hospital Readmissions Reduction Program Highlights

In an effort to reduce readmissions, the Affordable Care Act (ACA) included the Hospital Readmissions Reduction Program (“HRRP”); and in 2011 the Centers for Medicare & Medicaid
Services (“CMS”) issued its final rule implementing HRRP, which went into
effect on October 1, 2012. The purpose is to impose payment penalties on hospitals
with high readmission rates. Inpatient prospective payment system (“IPPS”)
hospitals with higher than expected readmissions rates will experience
decreased Medicare payments for all Medicare discharges relating to three
medical conditions: heart failure (“HF”), acute myocardial infarction (“AMI”),
and pneumonia (“PN”).

Performance will be based on 30-day readmissions relating to HF, AMI, and PN. The base inpatient payment for hospitals with actual readmission rates higher than their Medicare-calculated expected readmission rates will be reduced by an adjustment factor of 1% in FY
2013, 2% in FY 2014, and 3% in FY 2015 and later years. In addition, beginning
in FY 2015, CMS may expand the list of medical conditions to include chronic
obstructive pulmonary disorder, several cardiac and vascular surgical
procedures, and any other condition CMS chooses.

Similar penalties may extent to SNF’s in the near future since in March 2012 MedPac made the following recommendation to Congress: “The Congress should direct the Secretary to reduce
payments to skilled nursing facilities with relatively high risk-adjusted rates
of re-hospitalization during Medicare-covered stays and be expanded to include
a time period after discharge from the facility.” MedPac discusses the first 30
days following hospital discharge, where both the hospital and SNF would share
responsibility and penalties for an acute care readmission. The period from 31
days to 100 days following the initial hospital discharge the SNF would be
responsible for and suffer a penalty for an acute care re-hospitalization.  These changes would create incentives to promote more effective care transitions from one provider to the next including home care with the SNF possibly being liable for penalties for acute care
readmissions for 30 days following discharge to another PAC setting, for example a HHA. MedPac’s recommendation highlights five conditions that it believes are potentially avoidable: respiratory infections, congestive heart failure, urinary tract infections, electrolyte imbalance, and sepsis.

Both acute care and Post Acute Care providers need to prepare for developments in this area since CMS appears intent on modifying provider behavior driven by the current reimbursement system. Regardless of the details of payment reform, acute care and PAC providers will
benefit from closer alignment and integration.

  • Critical
         for hospitals to engage with PAC providers to develop systems to:
    • Lower potential penalties
    • Reduce the overall cost
    • Develop care guidelines to better coordinate and efficient/effective care
    • Establish a care transition system and team
    • Track patient’s clinical progress and provider costs through acute and PAC continuum
    • Hospitals and health systems will need to make decisions about owning or outsourcing PAC services.



The Affordable Care Act or “ACA” is the Patient Protection and Affordable Care Act
as amended by the Health Care and Education Reconciliation Act enacted in 2010.

Federal Register, Vol. 76, No. 160, 8/18/11, p.51660 available at


Medicare Payment Advisory Commission, Medicare Payment Policy, March 2012, see Chapter 7, Skilled nursing facility services and Recommendation 7-2.


Tags: nursing home operations, skilled nursing facility, medicare