title: Will Medicare Readmission Penalties Motivate Hospitals to Reduce Arthroplasty Readmissions?
abstract: The Centers for Medicare & Medicaid Services (CMS) recently imposed penalties against hospitals with above-average 30-day readmission rates following total joint arthroplasty (TJA). Hospitals must decide whether investments in readmission prevention are worthwhile. This study examines the financial incentives associated with unplanned readmissions before and after invocation of these penalties.
  
  
  
  Financial data were reviewed for 2028 consecutive primary TJAs performed on Medicare beneficiaries over a 2-year period at an urban academic health system. Readmission penalties were estimated in accordance with CMS policies.
  
  
  
  Unplanned readmissions generated a $4416 median contribution margin. The initial hospitalizations (when the TJA was performed) were financially unfavorable for patients subsequently readmitted relative to those not readmitted due to increased costs of care (P = .002), but these costs were more than outweighed by the increased reimbursement earned during the readmission (P < .001), ultimately making readmitted patients financially preferable (P < .001). Going forward, penalties will be levied for risk-adjusted readmission rates above the national rate of 4.8%. For the institution under review, the penalty per readmission outweighs the financial gains earned through readmission by $12,184, resulting in a net loss from readmissions if the rate exceeds 6.5%. It will be financially optimal to maintain a readmission rate (after risk adjustment) equal to the national average but exceeding that rate will be $7768 more expensive per readmission than undershooting that target.
  
  
  
  If our results are generalizable, unplanned Medicare readmissions have traditionally been financially beneficial, but CMS penalties outweigh this benefit. Thus, penalties should incentivize institutions to maintain below-average arthroplasty readmissions rates.
authors.affiliation: Department of Orthopaedic Surgery, University of North Carolina Hospitals, Chapel Hill, North Carolina.
authors.forename: R Carter
authors.initials: RC
authors.lastname: Clement
authors.affiliation: Department of Orthopaedic Surgery, University of Florida, Gainesville, Florida.
authors.forename: Caitlin M
authors.initials: CM
authors.lastname: Gray
authors.affiliation: Department of Orthopaedic Surgery, Indiana University, Indianapolis, Indiana.
authors.forename: Michael M
authors.initials: MM
authors.lastname: Kheir
authors.affiliation: Department of Orthopaedic Surgery, Hospital for Special Surgery, New York, New York.
authors.forename: Peter B
authors.initials: PB
authors.lastname: Derman
authors.affiliation: Department of Anesthesiology and Critical Care, University of Pennsylvania Health System, Philadelphia, Pennsylvania.
authors.forename: Rebecca M
authors.initials: RM
authors.lastname: Speck
authors.affiliation: Department of Orthopaedic Surgery, Hospital of the University of Pennsylvania, Philadelphia, Pennsylvania.
authors.forename: L Scott
authors.initials: LS
authors.lastname: Levin
authors.affiliation: Department of Anesthesiology and Critical Care, University of Pennsylvania Health System, Philadelphia, Pennsylvania.
authors.forename: Lee A
authors.initials: LA
authors.lastname: Fleisher
mesh_terms: D019644:Arthroplasty, Replacement, Hip / Q000191:economics*; D019645:Arthroplasty, Replacement, Knee / Q000191:economics*; D003365:Costs and Cost Analysis; D006761:Hospitals; D006801:Humans; D006278:Medicare / Q000191:economics / Q000331:legislation & jurisprudence; D010359:Patient Readmission / Q000191:economics* / Q000706:statistics & numerical data; D012189:Retrospective Studies; D020379:Risk Adjustment; D014481:United States
keywords: reimbursement penalties; the Centers for Medicare & Medicaid Services (CMS); total hip arthroplasty (THA); total joint arthroplasty (TJA); total knee arthroplasty (TKA); unplanned readmissions