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Study: Risk Adjustment Affects Readmissions Penalties

Adjusting for social risk factors in Medicare’s Hospital Readmissions Reduction Program (HRRP) results in decreased penalties for safety-net hospitals, according to a new Health Services Research study.

Although value-based purchasing programs aim to improve quality improvement across all health care providers, evidence suggests these programs disproportionately penalize providers that care for vulnerable and low-income populations. This study examined Medicare inpatient and outpatient claims for acute myocardial infarction, congestive heart failure, and pneumonia between Dec. 1, 2012, and Nov. 30, 2015.

Beneficiary mailing addresses were geocoded and classified according to the 2013 Area Deprivation Index (ADI) from the University of Wisconsin School of Medicine and Public Health. The ADI measures neighborhood disadvantage based on education, employment, income, and housing quality and previously has demonstrated association with readmission.

Under current HRRP specifications, hospitals serving a safety-net role had higher readmission rates for all three conditions studied. After adding social-risk adjustment, more than half of the safety-net hospitals saw decreased penalties for each condition, and between 4 and 7.5 percent of these hospitals’ penalties were eliminated for certain conditions. In comparison, among the most affluent hospitals, 30 to 40.5 percent saw increased penalties after risk adjustment, and 5 to 6 percent were newly penalized.

Accounting for social risk can have a major financial effect on hospitals that fill a safety-net role. This study provides important new evidence that incorporating social risk into risk‐adjustment models might allow hospitals that serve the most vulnerable to flourish in meeting their underlying mission.

For more information on how sociodemographic factors affect health outcomes, visit our resource page.

Contact Senior Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

Emily Schweich is a communications manager at America's Essential Hospitals.

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