The Financial Impact of an Avoided Readmission for Teaching and Safety-Net Hospitals Under Medicare’s Hospital Readmission Reduction Program

We examined the financial incentives to avoid readmissions under Medicare’s Hospital Readmission Reduction Program (HRRP) for safety-net hospitals (SNHs) and teaching hospitals (THs) compared to other hospitals. Using Medicare’s FY2016 Hospital Compare and readmissions data for 2,465 hospitals, we tested for differential financial impact for SNHs (n=658) relative to non-SNHs (n=1,807), and for major (n=231) and minor (n=591) THs relative to non-THs (n=1,643). We examined hospital-level factors mediating differences in financial impact by hospital type. The full financial impact of an avoided readmission was 10-15% greater for major THs compared to non-THs ($18,047 vs. $15,478 for AMI) but no different for SNHs compared to non-SNHs. The greater financial impact for THs was strongly positively predicted by hospitals’ poor initial readmission performance. We found little evidence that the HRRP creates disincentives for SNHs and THs to invest in readmission reduction efforts, and THs have greater returns from readmissions avoidance than non-THs.