Re-Thinking Readmissions: Analyzing the Effects of the New Stratified Methodology on HRRP Penalty Allocation

Abstract

This report addresses the Affordable Care Act’s Hospital Readmissions Reduction Program and the penalties associated with it. It outlines the history of the HRRP, derives its payment adjustment calculation, and assesses the degree to which the program appropriately distributes penalties. Later in the report we introduce the upcoming changes to the HRRP penalty calcu- lation, known as the new stratified methodology. We derive this methodology and provide an algorithm to calculate its payment adjustments. Finally, we compare the predicted penalty allocations of each of the two method- ologies, evaluating their respective effects on hospitals serving different demographic groups.