Adjusting for social risk factors impacts performance and penalties in the hospital readmissions reduction program

OBJECTIVE: Medicare's Hospital Readmissions Reduction Program (HRRP) does not account for social risk factors in risk adjustment, and this may lead the program to unfairly penalize safety-net hospitals. Our objective was to determine the impact of adjusting for social risk factors on HRRP penalties. STUDY DESIGN: Retrospective cohort study. DATA SOURCES/STUDY SETTING: Claims data for 2 952 605 fee-for-service Medicare beneficiaries with acute myocardial infarction (AMI), congestive heart failure (CHF) or pneumonia from December 2012 to November 2015. PRINCIPAL FINDINGS: Poverty, disability, housing instability, residence in a disadvantaged neighborhood, and hospital population from a disadvantaged neighborhood were associated with higher readmission rates. Under current program specifications, safety-net hospitals had higher readmission ratios (AMI, 1. 020 vs 0. 986 for the most affluent hospitals; pneumonia, 1. 031 vs 0. 984; and CHF, 1. 037 vs 0. 977). Adding social factors to risk adjustment cut these differences in half. Over half the safety-net hospitals saw their penalty decline; 4-7. 5 percent went from having a penalty to having no penalty. These changes translated into a 17 million reduction in penalties to safety-net hospitals. CONCLUSIONS: Accounting for social risk can have a major financial impact on safety-net hospitals. Adjustment for these factors could reduce negative unintended consequences of the HRRP.