Kaiser Health News’ data on hospital readmissions penalties comes from the Centers for Medicare & Medicaid Services (CMS), which oversees the Hospital Readmissions Reduction Program. On Aug. 1, CMS published data tables containing the “Readmissions Adjustment Factor” for individual hospitals.
The adjustment factor is a multiplier CMS will apply to all base operating DRG reimbursements for the fiscal year beginning in October 2012. The lowest adjustment factor, 0.9900, is the maximum penalty and means that a hospital would be reimbursed 99 percent of its Medicare payment. The highest adjustment factor is 1.0000, meaning that a hospital would receive its full reimbursement, or 100 percent.
For our stories, charts and graphics, Kaiser Health News expressed the adjustment factor as a penalty, for the purposes of clarity. The readmissions penalties were calculated by subtracting each adjustment factor from 1. Thus, a hospital losing the most money because of its high readmission rate (which CMS gave an adjustment factor of 0.9900) is listed by KHN as receiving a 1.00% penalty. A hospital whose readmissions CMS determined to be acceptable enough to not warrant losing any money (with an adjustment factor of 1.0000) is listed by KHN as receiving a 0.00% penalty.
CMS’s detailed methodology for how it calculated the adjustment factors can be found on its Readmissions Reduction Program web page and in the FY 2013 Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals.
CMS’ adjustment factors for individual hospitals can be found in the FY 2013 Final Rule Impact file. More detailed information about how CMS evaluated the readmissions for each hospital’s patients is contained in the Hospital Readmissions Reductions Program Supplemental Data file.
KHN calculated each state’s readmissions penalties by averaging the penalties for every hospital in that state that received an adjustment factor. To calculate the regional rates, KHN grouped hospitals into Hospital Referral Regions (HRRs), which are geographic boundaries established by the Dartmouth Atlas and widely used by health policy researchers. Dartmouth defines HRRs as “regional health care markets for tertiary medical care that generally requires the services of a major referral center.” Dartmouth set HRR boundaries “by determining where patients were referred for major cardiovascular surgical procedures and for neurosurgery.” KHN calculated each HRR’s readmissions penalties by averaging the penalties for every hospital in the HRR that received an adjustment factor.
Maryland and Maryland hospitals are omitted from the KHN charts and graphics, because CMS exempted that state’s hospitals from the readmissions reduction program. Maryland received this exclusion because the state has a unique federal waiver that governs how Medicare pays hospitals.
To gauge the socioeconomic status of each hospital’s patient population, KHN relied on an index CMS uses to decide whether a hospital deserves "Disproportionate Share Hospital" (DSH) payments because it treats an excess of poor patients. That index, which CMS calculated and publishes for individual hospitals in the FY 2013 IPPS Impact File, reflects the prevalence of admitted patients who qualify for Medicaid, the joint federal-state health program for the poor, or Medicare's Supplemental Security Income benefit for the poor and disabled.
KHN divided the hospitals into quartiles based on their number of low-income patients. KHN excluded hospitals for which CMS reported no low-income patients out of concern about data irregularities, shortcomings in hospital reporting or abnormalities in the hospitals’ patient populations that might make them inappropriate for comparison with other acute care hospitals.