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Brief Report
February 2017

Association Between Medicare Hospital Readmission Penalties and 30-Day Combined Excess Readmission and Mortality

Author Affiliations
  • 1University of Michigan Health System, Ann Arbor
  • 2Ann Arbor Veterans Affairs Health System, Ann Arbor, Michigan
JAMA Cardiol. 2017;2(2):200-203. doi:10.1001/jamacardio.2016.3704
Key Points

Question  How would Medicare financial penalties for US hospitals change if policy equally weighted 30-day readmissions and mortality, rather than 10-fold in favor of preventing readmissions?

Findings  Using publicly available hospital data, penalties for one-third of hospitals would have substantially changed if 30-day readmissions and mortality were weighted equally.

Meaning  Current Medicare policy does not meet the goals of aligning incentives and fairly reimbursing hospitals for patient-centered outcomes.


Importance  US hospitals receive financial penalties for excess risk–standardized 30-day readmissions and mortality in Medicare patients. Under current policy, readmission prevention is incentivized over 10-fold more than mortality reduction.

Objective  To determine how penalties for US hospitals would change if policy equally weighted 30-day readmissions and mortality.

Design, Setting, and Participants  Publicly available hospital-level data for fiscal year 2014 was obtained, including excess readmission ratio (ERR; risk-standardized predicted over expected 30-day readmissions) and 30-day mortality rates for heart failure, pneumonia, and acute myocardial infarction, as well as readmission penalties (as percent of Medicare Diagnosis Group payments). An excess mortality ratio (EMR) was calculated by dividing the risk-standardized predicted mortality by the national average mortality. Case-weighted aggregate ERR (ERRAGG) and EMR (EMRAGG) were calculated, and an excess combined outcome ratio (ECORAGG) was created by averaging ERRAGG and EMRAGG. We examined associations between readmission penalties, ERRAGG, EMRAGG, and ECORAGG. Analysis of variance was used to compare readmission penalties in hospitals with concordant (both ratios >1 or <1) and discordant performance by ERRAGG and ECORAGG.

Main Outcomes and Measures  The primary outcome investigated was the association between readmission penalties and the calculated excess combined outcome ratio (ECORAGG).

Results  In 1963 US hospitals with complete data, readmission penalties closely tracked excess readmissions (r = 0.81; P < .001), but were minimally and inversely related with excess mortality (r = −0.12; P < .001) and only modestly correlated with excess combined readmission and mortality (r = 0.36; P < .001). Using hospitals with concordant ERRAGG and ECORAGG as the reference group, 17% of hospitals had an ECORAGG ratio less than 1 (ie, superior combined mortality/readmission outcome) with an ERRAGG ratio greater than 1, and received higher mean (SD) readmission penalties (0.41% [0.28%] vs 0.29% [0.37%]; P < .001); 16% of US hospitals had an ECORAGG ratio of greater than 1 (ie, inferior combined mortality/readmission outcome) with an ERRAGG ratio less than 1, and received minimal mean (SD) readmission penalties (0.08% [0.12%]; P < .001 for comparison with reference).

Conclusions and Relevance  In fiscal year 2014, financial penalties for one-third of US hospitals would have been substantially altered if 30-day readmission and mortality were considered equally important. Under most circumstances, patients would rather avoid death than rehospitalization. Current Medicare financial penalties do not meet the goals of aligning incentives and fairly reimbursing hospitals for patient-centered outcomes.