PA Hospitals to See Slightly Reduced Penalties under New CMS Rule > Hospital Association of Pennsylvania


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PA Hospitals to See Slightly Reduced Penalties under New CMS Rule

April 29, 2019

A study published last week in JAMA Internal Medicine analyzed how Medicare’s recent changes to the Hospital Readmission Reduction Program (HRRP) affect hospitals with high versus low proportions of dual Medicaid- and Medicare-eligible patient populations. 

Under the HRRP’s previous methodology, hospitals were penalized if their readmission rates for patients with any of six conditions exceeded a national standard. Critics charged that a national standard failed to adequately risk adjust for sicker patients, resulting in higher penalties for hospitals disproportionately serving vulnerable populations. The new rule, implemented during fiscal year 2019, changed the formula to compare hospitals to peers based on the proportion of “dual eligible” enrollees.

Researchers sampled 3,049 hospitals and analyzed penalties under the old and new methodologies.

When segmenting hospitals by their proportion of dual eligible patients, researchers found that, under the new formula, the 20 percent of hospitals with the largest proportion of dual eligibles saw the greatest benefit: a decrease of $22.4 million in penalties. Conversely, those with the smallest proportion saw an increase of $12.3 million in penalties.

The analysis found that certain hospitals were significantly more likely to see a reduction in penalties based on these characteristics:

  • Large hospitals
  • Teaching hospitals
  • Hospitals located in the most disadvantaged neighborhoods
  • Rural hospitals
  • Hospitals serving the highest proportion of disabled beneficiaries
  • Hospitals located in states with higher Medicaid eligibility cutoffs 

Hospitals in Medicaid expansion states also saw decreases, as did hospitals in the Northeast and West; those in the Midwest and South saw increases.

A state-by-state graphic published by POLITICO shows that, overall, Pennsylvania hospitals saw a one percent decrease in penalties under the new rule.

U.S. map state readmissionsOn behalf of Pennsylvania hospitals, HAP advocated through various channels for changes to the HRRP’s risk adjustment methodology so that it would more adequately account for the impact of caring for vulnerable patients. The 21st Century Cures Act, enacted during 2016, included provisions that required Centers for Medicare & Medicaid Services to make these adjustments.

HAP also works to help Pennsylvania hospitals participating in its Hospital Improvement Innovation Network (HIIN) to lower their 30 day all-cause readmissions rates, and has begun monitoring seven-day readmissions for earlier trending. 

For more information about the JAMA study, please contact Sari Siegel, PhD, HAP’s vice president, health care research. For additional information related to readmissions, please contact Elizabeth Murray, RN, HAP’s HINN readmissions project manager. 


Maddox K.E.J., et al. “Association of stratification by dual enrollment status with  financial penalties in the Hospital Readmissions Reduction Program.” JAMA Intern Med. 4/15/2019; last accessed 4/23/19.
Doherty T. “How do hospitals fare under the new readmissions penalty?” POLITICOPro DataPoint on Health Care. 4/22/19; last accessed 4/23/19.


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