There is a lesser-known Medicare program called the "Hospital Readmissions Reduction Program" (HRRP) that was created in 2012 under the ACA. (It is another one of many hidden success stories of the Affordable Care Act.) The main goal of this program (unsurprisingly) is to reduce hospital readmissions. Why is this important? That's because his is considered one of the quickest ways to reduce health care spending. The Network for Excellence In Health Innovation (NEHI) estimates that $25 billion can be saved annually by reducing hospital readmissions alone.
So the HRRP program seems to be working. Medicare readmissions were down 100,000 in 2015 and, since 2010, has fallen in every state but one, Vermont. (Readmission Statistics)
Apparently it still has not been enough. The CMS just announced that it has levied $528 million in fines to about 2600 hospitals for the upcoming fiscal year beginning on Oct 1st. If you take into account the ~1400 hospitals that are exempt from this program (e.g., veterans, Children and psychiatric facilities), it comes to a whopping 60% of eligible hospitals who were fined!
Further, the amount of this year's fine is a 20% increase from last year.
So what's happening here? Readmissions are down but more than half of the hospitals are getting fined. There are two primary explanations:
The fines are levied according to the amount of expected readmissions by the HRRP. So it's possible that they are setting overly ambitious expectations that do not have a connection to real-world scenarios.
Many readmissions are simply unpreventable. The idea is that with better discharge instructions and follow-up communications, patients will adhere to their treatment plans better. In other words, compliance would rise and this would affect the rate of readmission.
The fines are simply not enough to encourage hospitals to take stronger actions
Nonetheless, an attempt to realize $25 billion in savings is certainly worth a $528 million slap on the hand. Don't worry, there's a maximum limit to the fines of 3% of their Medicare payments and the average fine levied was only 0.71%. So the hospitals are are not being fined out of business (as many ACA opponents might complain).
However, the HRRP program is certainly showing positive results. Further studies on its effectiveness are pending and should prove very interesting.