In 2012, Medicare began to penalize hospitals which had too many readmissions. For a small number of targeted conditions, the program compares actual readmissions within 30 days to what an acceptable readmission rate should be. This is an important part of the drive to “pay for value, not volume.”
For example, if a patient who had a knee replacement is readmitted within 30 days because the implant was poorly implanted, the hospital used to profit from that readmission because the extra costs would just be submitted to Medicare for reimbursement.
Evidence so far suggests reducing readmission was low-hanging fruit. In the program’s fourth year, Medicare will penalize over half the nation’s hospitals a total of $528 million, an increase of $108 million over last year. It is a significant increase, but not a money-maker for taxpayers, amounting to just 0.18 percent of Medicare’s expected hospital spending of $287.1 billion in 2016.