Hospital Performance Under Alternative Readmission Measures Incorporating Observation Stays

OBJECTIVE: To determine the extent to which counting observation stays changes hospital performance on 30-day readmission measures. METHODS: This was a retrospective study of inpatient admissions and observation stays among fee-for-service Medicare enrollees in 2017. We generated 3 specifications of 30-day risk-standardized readmissions measures: the hospital-wide readmission (HWR) measure utilized by the Centers for Medicare and Medicaid Services, which captures inpatient readmissions within 30 days of inpatient discharge; an expanded HWR measure, which captures any unplanned hospitalization (inpatient admission or observation stay) within 30 days of inpatient discharge; an all-hospitalization readmission (AHR) measure, which captures any unplanned hospitalization following any hospital discharge (observation stays are included in both the numerator and denominator of the measure). Estimated excess readmissions for hospitals were compared across the 3 measures. High performers were defined as those with a lower-than-expected number of readmissions whereas low performers had higher-than-expected or excess readmissions. Multivariable logistic regression identified hospital characteristics associated with worse performance under the measures that included observation stays. RESULTS: Our sample had 2586 hospitals with 5,749,779 hospitalizations. Observation stays ranged from 0% to 41.7% of total hospitalizations. Mean (SD) readmission rates were 16.6% (5.4) for the HWR, 18.5% (5.7) for the expanded HWR, and 17.9% (5.7) in the all-hospitalization readmission measure. Approximately 1 in 7 hospitals (14.9%) would switch from being classified as a high performer to a low performer or vice-versa if observation stays were fully included in the calculation of readmission rates. Safety-net hospitals and those with a higher propensity to use observation would perform significantly worse. CONCLUSIONS: Fully incorporating observation stays in readmission measures would substantially change performance in value-based programs for safety-net hospitals and hospitals with high rates of observation stays.