Hospital Readmissions Reduction Program: An Economic and Operational Analysis

Abstract

The Hospital Readmissions Reduction Program (HRRP), a part of the US Patient Protection and Affordable Care Act, requires the Centers for Medicare and Medicaid Services to penalize hospitals with excess readmissions. We take an economic and operational (patient flow) perspective to analyze the effectiveness of this policy in encouraging hospitals to reduce readmissions. We introduce a single-hospital model to capture the dependence of a hospital's readmission-reduction decision on various hospital characteristics. We derive comparative statics that predict how changes in hospital characteristics impact the hospital's readmissionreduction decision. We then proceed to develop a game-theoretic model that captures the competition between hospitals introduced by the HRRP policy's benchmarking mechanism. We provide bounds that apply to any equilibrium of the game and show that the comparative statics derived from the single-hospital model remain valid after the introduction of competition. Importantly, the comparison of the single-hospitals and multi-hospital models shows that, while the competition among hospitals often encourages more hospitals to reduce readmissions, it can only increase the number of "worst offenders," which are hospitals that prefer paying penalties over reducing readmissions in any equilibrium. We calibrate our model with a dataset of hospitals in California which allows us to quantify the results and insights derived from the model. Last, we validate our model with recent hospitals' performance data collected since the policy was implemented.

Patient care effectiveness and financial outcomes of hospital physician contracting emphasis

“…In particular, we combine information from multiple data sources made available by CMS. Indeed, data provided by CMS has been used in extant healthcare research focused on hospital readmissions (Zhang et al, 2016) and costs (Senot et al, 2016). Second, we add the CMS Hospital Compare data sets available via CMS and the National Bureau of Economic Research to conduct post hoc analysis with additional measures of care quality.…”

“…As 55% of all hospital care falls under Medicare and Medicaid, practically every hospital in the U.S. participates (Steinberg, 2015). Indeed, data provided by CMS has been used in extant healthcare research focused on hospital readmissions (Zhang et al, 2016) and costs (Senot et al, 2016).…”

“…Case Mix Index (CMI): It is important to note that treating patients with more complex conditions incurs higher costs and also affects length of stay, requiring adjustment for the mix of patient conditions treated at the hospital (Zhang et al, 2016). We briefly discuss these next.…”

Hospital readmission following pediatric heart transplantation

“…Hospital readmission represents a significant utilization of resources . Accordingly, there have been numerous efforts in recent years to reduce hospital readmission . The US Center for Medicare and Medicaid Services has emphasized that lower hospital readmissions within 30 days are an important benchmark for quality .…”

“…3 Accordingly, there have been numerous efforts in recent years to reduce hospital readmission. 4 The US Center for Medicare and Medicaid Services has emphasized that lower hospital readmissions within 30 days are an important benchmark for quality. 5 To date, little is known about the hospital readmission following pediatric heart transplantation.…”