FutureFocus January 10, 2018 ACO Savings Not Related To Reduced Hospitalizations

Lisa Remington

In this week’s FutureFocus, we look at an interesting fact about MSSP ACOs and the relationship to hospitalizations. A Harvard study finds ACO preventable hospital admissions didn't decrease, but instead rose. In another article, we look at readmission penalties. Since the onset of the Readmission Reduction Program (HRRP), penalties have continued to rise. The analysis compares FY 2013-2017. In our Washington Report, we examine the Medicare Extenders Package and the impact to post-acute providers.

Lisa Remington, President, Remington Health Strategy Group

Readmissions penalties still continue to grow.

                                      Fiscal 2013      Fiscal 2014      Fiscal 2015      Fiscal 2016      Fiscal 2017

Percentage of

Hospitals Penalized         64%                 66%                 78%                 78%                 78%


CMS estimate of             $290 million     $227 million      $428 million     $420 million      $528 million

total penalties

Readmissions Reduction Program (HRRP)


Section 3025 of the Affordable Care Act added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires CMS to reduce payments to IPPS hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. The regulations that implement this provision are in subpart I of 42 CFR part 412 (§412.150 through §412.154).

News on the Hospital Readmissions Reduction Program

CMS has posted the FY 2018 IPPS/LTCH PPS final rule. For more information on these payment-related policies, please refer to the FY 2018 IPPS Final Rule in the Downloads section below.

Readmission Measures

In the FY 2012 IPPS final rule, CMS finalized the following policies with regard to the readmission measures under the Hospital Readmissions Reduction Program:

  • Defined readmission as an admission to a subsection (d) hospital within 30 days of a discharge from the same or another subsection (d) hospital;
  • Adopted readmission measures for the applicable conditions of acute myocardial infarction (AMI), heart failure (HF), and pneumonia (PN);
  • Established a methodology to calculate the excess readmission ratio for each applicable condition, which is used, in part, to calculate the readmission payment adjustment. A hospital’s excess readmission ratio is a measure of a hospital’s readmission performance compared to the national average for the hospital’s set of patients with that applicable condition.
  • Established a policy of using the risk adjustment methodology endorsed by the National Quality Forum (NQF) for the readmissions measures to calculate the excess readmission ratios, which includes adjustment for factors that are clinically relevant including certain patient demographic characteristics, comorbidities, and patient frailty.
  • Established an applicable period of three years of discharge data and the use of a minimum of 25 cases to calculate a hospital’s excess readmission ratio for each applicable condition.

In the FY 2014 IPPS final rule, CMS adopted the application of an algorithm to account for planned readmissions to the readmissions measures. In addition, CMS finalized the expansion of the applicable conditions beginning with the FY 2015 program to include: (1) patients admitted for an acute exacerbation of chronic obstructive pulmonary disease (COPD); and (2) patients admitted for elective total hip arthroplasty (THA) and total knee arthroplasty (TKA).

In the FY 2015 IPPS final rule, CMS finalized the expansion of the applicable conditions beginning with the FY2017 program to include patients admitted for coronary artery bypass graft (CABG) surgery in the calculation of a hospital’s readmission payment adjustment factor.

In the FY 2016 IPPS final rule, CMS finalized an update to the pneumonia readmission measure by expanding the measure cohort to include additional pneumonia diagnoses: (i) patients with aspiration pneumonia; and (ii) sepsis patients coded with pneumonia present on admission (but not including severe sepsis).

In the FY 2017 IPPS final rule, CMS finalized the following policies with regard to the readmission measures:

  • Added the CABG surgery readmission measure
  • Expanded the pneumonia measure cohort to include inpatient stays with a primary diagnosis of aspiration pneumonia as well as stays with a primary diagnosis of sepsis (excluding severe sepsis) and a secondary diagnosis of pneumonia present on admission.
  • Excluded patients with an ICD-9 procedure code for left ventricular assist device (LVAD) implantation or heart transplantation either during the index admission or in the 12 months prior to the index admission for the HF measure.
  • Adopted version 4.0 of the Planned Readmission Algorithm
  • Adopted an Extraordinary Circumstance Exception policy (implemented FY16)

In the FY 2018 IPPS final rule, CMS finalized the following policies with regard to the readmission measures:

  • Incorporated International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) and Procedure Coding System (ICD-10-PCS) codes in addition to ICD-9-CM codes to the measure methodology and planned readmission algorithm (version 4)

Source: CMS