The Centers for Medicare & Medicaid Services (“CMS”) will be penalizing more than 2,000 hospitals nationwide starting in October 2012 under the Hospital Readmission Reduction Program (the “Program”).  A number of New York hospitals were included on the list of hospitals to which CMS will apply the readmission penalty to reimbursements, including Beth Israel Medical Center, John T. Mather Memorial Hospital of Port Jefferson, Lenox Hill Hospital, North Shore University Hospital, St. Francis Hospital and Winthrop-University Hospital.  For the full list of affected hospitals, please click here.

 The Program, established pursuant to section 3025 of the Patient Protection and Affordable Care Act, requires CMS to reduce payments made to inpatient prospective payment system (“IPPS”) hospitals with excess readmissions.  The Program only applies to hospitals that are general, acute care, short-term hospitals or hospitals that are paid under section 1814(b)(3) of the Social Security Act.  For purposes of the Program, a “readmission” will occur when a patient is discharged from an IPPS hospital and then re-admitted to the same or another IPPS hospital within a time period specified by the Secretary of Health and Human Services, such as 30 days, from the date of the first discharge.   

 In order to determine whether a hospital is to be penalized under the Program, CMS will compare the hospital’s actual readmission rate to its expected readmission rate with respect to three conditions – heart attacks, heart failure and pneumonia.  Medicare payments will be reduced for those hospitals whose actual readmission rates are determined to be higher than their  expected readmission rates.  On October 1, 2015, the Secretary of Health and Human Services will include four additional conditions in the Program – chronic obstructive pulmonary disease, coronary artery bypass graft, percutaneous transluminal coronary angioplasty and vascular surgery, as well as additional conditions as the Secretary deems appropriate.

 For the first year of the Program, starting in October 2012 (Federal Fiscal Year 2013), Medicare payment reductions will be capped at a maximum of 1% of net inpatient Medicare payments.  The financial penalties will then increase for each following year before being capped at 3% of the base payment in Federal Fiscal Year 2015.

 All hospitals that are implicated in the Program should develop, or continue developing, comprehensive internal programs by which the hospital can measure and reduce its rate of patient readmissions.