Most hospitals in the nation are subject to penalties based on their performance on certain diagnosis-specific Medicare readmissions as part of the federal Medicare Hospital Readmissions Reduction Program (HRRP). The Commission previously encouraged reductions in unnecessary readmissions under the Admission-Readmission Revenue (ARR) program. The current episode-based payment model encourages hospitals to reduce readmissions, and enables hospitals to keep the savings from such reductions. To ensure savings are passed on the public, the Commission passes some savings to payers via the Potentially Avoidable Utilization (PAU) Savings Program.
Readmissions occur when a patient is discharged from a hospital and is admitted to any hospital within 30 days of the discharge. Preventable hospitals readmissions may result from complications from previous hospitalization and/or inadequate care coordination, and generate substandard care quality for patients and unnecessary costs. The Readmissions Reduction Incentive Program (RRIP) compares all-payer readmission rates adjusted for the severity of illness (casemix) for all types of inpatient visits for the calendar year with the rates in the base year to calculate improvement, and reviews the all-payer readmission rates adjusted for casemix and out-of-state ratios to calculate attainment.
On January 1, 2014 the State of Maryland entered into a new All-Payer Model demonstration contract with the Center for Medicare and Medicaid Innovation (CMMI). Among other provisions of this contract, the State is required to reduce the statewide Medicare fee-for-service readmission rate to the national Medicare readmission rate level over the five-year contract term and make yearly progress towards reducing this gap.
In order to meet the new Model requirements, the Commission approved the Readmissions Reduction Incentive Program (RRIP) in April 2014 to increase the incentives to reduce unnecessary readmissions. The RRIP began to impact hospital revenue starting in Rate Year 2016, with the first performance year of Calendar Year 2014. The initial program focused on providing a set amount of rewards for strong reductions in readmission rates. As the program evolved, penalties were added, along with sliding scale payment adjustments that recognized the variation in performance. For the Calendar Year 2016 performance year, the Commission altered the methodology to measure hospital performance as the better of attainment (rewarding high-performing hospitals) or improvement to determine payment adjustments. This adjustment to the methodology strengthens incentives for low-performing hospitals to improve and avoids penalizing high-performing hospitals.