Does a Reduction in Readmissions Result in Net Savings for Most Hospitals? An Examination of Medicare’s Hospital Readmissions Reduction Program

This study aimed (1) to estimate the impact of an incremental reduction in excess readmissions on a hospital’s Medicare reimbursement revenue, for hospitals subject to penalties under the Medicare’s Hospital Readmissions Reduction Program and (2) to evaluate the economic case for an investment in a readmission reduction program. For 2,465 hospitals with excess readmissions in the Fiscal Year 2016 Hospital Compare data set, we (1) used the Hospital Readmissions Reduction Program statute to estimate hospital-specific Medicare reimbursement gains per an avoided readmission and (2) carried out a pro forma analysis of investment in a broad-scale readmission reduction program under conservative assumptions regarding program effectiveness and using program costs from earlier studies. For an average hospital, avoiding one excess readmission would result in reimbursement gains of $10,000 to $58,000 for Medicare discharges. The economic case for investments in a readmission reduction effort was strong overall, with the possible exception of hospitals with low excess readmissions.