In the fiscal year 2013 Medicare inpatient prospective payment system (IPPS) final rule, the Centers for Medicare & Medicaid Services finalized which hospitals are subject to the Hospital Readmissions Reduction Program (HRRP), as well as what portion of the IPPS payment will be affected by the readmission adjustment factor. The impact on the diagnosis-related group (DRG) reimbursement will begin October 1, 2012, with the beginning of the federal fiscal year (FY).

Studies show nearly one in five patients discharged are readmitted within 30 days, at a cost to the Medicare program of $15 billion per year. Beginning in October, hospitals with readmission rates higher than a certain threshold for the three conditions below will be penalized up to 1 percent of their aggregate base DRG rate. The penalty increases to a maximum of 2 percent in FY 2014 and 3 percent in FY 2015. In addition, the list of conditions measured increases in FY 2015.

Conditions Measured in FY 2013

• Acute Myocardial Infarction
• Heart Failure
• Pneumonia

Additional Conditions Measured Beginning in FY 2015

• Chronic Obstructive Pulmonary Disease
• Coronary Artery Bypass Graft
• Percutaneous Transluminal Coronary Angioplasty
• Other Vascular Conditions

The FY 2013 payment adjustments are based on readmission rates from July 1, 2008, through June 30, 2011; FY 2014 payment adjustments will be based on readmission rates from July 1, 2009, through June 30, 2012; and FY 2015 payment adjustments will be based on readmission rates from July 1, 2010, through June 30, 2013.

Nearly 2,000 hospitals will be penalized by the HRRP in FY 2013. These hospitals’ combined Medicare payments will be reduced by about $260 million; 252 hospitals will receive the full 1 percent payment reduction.

The HRRP applies only to PPS hospitals.  Sole community hospitals, even those paid based on a hospital specific rate, will be affected by the payment adjustments.  Critical Access Hospitals, Long Term Acute Care Hospitals, Inpatient Rehabilitation Facilities, and Psychiatric Hospitals are exempt.

Hospitals should assess the impact the HRRP will have on their facility, implement procedures to measure and evaluate readmissions and identify opportunities to improve readmission rates, including working with post-acute care providers in their service area.

For more information on how the HRRP may affect your organization, contact your BKD advisor.