On October 1, The Centers for Medicare & Medicaid Services (CMS) initiated a series of penalties on U.S. hospitals under the Hospital Readmission Reduction Program for CY 2020.

Overall, Medicare cut payments to 2,583 hospitals under the initiative, which seeks to reduce the number of patients who return for a second stay within a month. The severity and broad application of the penalties, which Medicare estimates will cost hospitals $563 million over a year, follows the trend of the past few years. Of the 3,129 general hospitals evaluated in the Hospital Readmission Reduction Program, 83% received a penalty, which will be deducted from each payment for a Medicare patient stay over the fiscal year from October 1, 2019-October 1,2020.

The penalties are based on the frequency of readmissions of Medicare patients who had originally been treated for heart failure, heart attack, pneumonia, chronic lung disease, hip and knee replacement or coronary artery bypass graft surgery. Readmissions that were scheduled to occur are not counted.

Medicare counts the readmission of patients who returned to a hospital within 30 days, even if that hospital is not the one that originally treated them. In those cases, the penalty is applied to the first hospital. This year’s penalties are based on discharges from July 1, 2015, to June 30, 2018.

The average penalty will be a 0.71% decrease in payment for each Medicare patient who leaves the hospital over the next year.

According to a Kaiser Health News analysis, 1,177 hospitals received a higher penalty than they did last year, 1,148 hospitals received a lower one than last year and 64 hospitals received the same penalty as last year. In addition, according to the analysis, 194 hospitals that had not been penalized last year are being punished this year. The same analysis found that the maximum penalty — a 3% reduction in payments — was assessed against 56 hospitals and that 372 hospitals avoided penalties in both years. These figures do not include 2,142 hospitals that Medicare exempted from the program this year, either because they had too few cases to judge; were veteran’s hospitals, children’s hospitals, psychiatric hospitals or were critical-access hospitals, which are the only hospitals within reach of some patients. Also, Maryland hospitals were excluded because Congress lets that state set its own rules on how to distribute Medicare money and handle readmissions.

The Centers for Medicare & Medicaid Services determines its penalties by looking at national averages for each of the conditions, so hospitals that have reduced their readmissions from previous years can still take a hit. The hospital industry argues it may be approaching the limits of how much it can do to prevent readmissions. A repeat stay, hospitals say, is sometimes necessary no matter what precautions are taken.

View the 2020 penalties by hospital here.

View the 2020 readmission rate data here (CSV file).