Hospitals serving nursing home residents disproportionately penalized under hospital readmissions reduction program

BACKGROUND: Risk factors common to nursing home (NH) residents are potentially not fully captured by the Hospital Readmissions Reduction Program (HRRP). The unique challenges faced by hospitals that disproportionately serve NH residents who are at greater risk of readmissions have not been studied. METHODS: Using 100% Medicare Provider Analysis and Review File and the Minimum Data Set from 2010-2013, we constructed a measure of hospital share of NH-originating hospitalizations (NOHs). We defined hospital share of NOHs as the proportion of inpatient stays by patients aged 65 or older who were directly admitted from NHs. To evaluate the impact of the share of NOHs on readmission penalties, we categorized hospitals into quartiles according to their share of NOHs and estimated the differences in the adjusted penalties across hospital quartiles after accounting for hospital characteristics, market characteristics and state fixed effects. We repeated the analyses for the penalties incurred in each year between 2015 and 2019. RESULTS: Hospitals varied substantially in the share of NOHs (median [interquartile range], 11.3% [8.2%-15.1%]), with limited variation over time. In 2015, hospitals in the highest quartile of NOH received on average 0.58% Medicare payment reduction compared to 0.44% reduction among those in the lowest quartile (32.9% higher penalties, p < 0.001). The increase in penalties continued to grow in 2017 and 2018 when the HRRP expanded to include additional target conditions (47.3% and 66.7%, respectively, p < 0.001 for both). Although the effect diminished in 2019 following the additional adjustment for hospital's dual-eligible share, hospitals in the highest quartile of NOH still incurred 43.0% (p < 0.001) higher penalties than those in the lowest quartile. CONCLUSIONS: Hospitals varied considerably in their share of NOHs. Hospitals having a higher share of NOHs were disproportionately penalized for excess readmissions, even under the revised policy that adjusts for the share of dual-eligible admissions.