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.