Hospital readmission penalties shift based on Medicare Advantage penetration: Study

Readmission penalties for hospitals with greater Medicare Advantage penetration are distorted, possibly due to unobserved severity, according to a University of Michigan of Ann Arbor study published Jan. 22 in JAMA Network Open.

CMS’s Hospital Readmissions Reduction Program is a value-based initiative designed to deter readmissions and promote patient and caregiver engagement with discharge plans.

The researchers evaluated Hospital Readmissions Reduction Program data across fiscal years 2019 to 2022, focusing on six conditions targeted by the program: acute myocardial infarction, chronic obstructive pulmonary disease, heart failure, pneumonia, coronary artery bypass graft surgery, and elective primary total hip or knee arthroplasty. The study encompassed 3,203 hospitals.

Here are four notes from the research:

1. After accommodating for MA penetration, estimates suggested hospitals in the first quintile of Medicare Advantage penetration were penalized $30,746 more on average versus those in the fifth quintile, which were penalized $26,915 less.

2. Peer grouping, or comparing hospitals to only similar ones, did not resolve the penalty differences.

3. Average MA penetration increased from 25.3% to 29.9% throughout the studied timeframe. 

4. Unobserved severity — patient well-being factors that may not present in claims data — could be one issue in the program. Risk adjustment may not account for every indicator of patient status. “Because MA beneficiaries are unobservably healthier than traditional Medicare counterparts on average, hospitals with greater MA beneficiary shares likely have unobservably higher-severity TM populations,” the paper said.

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