Hospitals with Sicker, Socially Disadvantaged Patients Penalized For Patients They Serve

J. Michael McWilliams MD, PhD Associate Professor Interview with:
J. Michael McWilliams MD, PhD
Associate Professor and
Dr. Michael Barnett MD Researcher and General Medicine Fellow Dept. of Health Care Policy Harvard Medical School Boston MADr. Michael Barnett MD
Researcher and General Medicine Fellow
Dept. of Health Care Policy
Harvard Medical School
Boston MA

Medical Research: What is the background for this study?

Response: The financial impact of Medicare’s Hospital Readmissions Reduction Program on hospitals is growing.  In this year’s round of penalties, nearly 2,600 hospitals were collectively fined $420 million for excess readmissions. There has been concern that the risk-adjustment methods used by Medicare to calculate a hospital’s expected readmission rate is inadequate, meaning that hospitals disproportionately serving sicker and more disadvantaged patients are being penalized because of the populations they serve rather than their quality of care.  Specifically, Medicare accounts only for some diagnoses, age and sex but no other clinical or social characteristics of patients admitted to the hospital.

No study to date has examined the impact adjusting for a comprehensive set of clinical and social factors on differences in readmission rates between hospitals. We did this by using detailed survey data from the Health and Retirement Study linked to information on admissions and readmissions in survey participants’ Medicare claims data.  We then compared differences in readmission rates between patients admitted to hospitals in the highest vs. lowest quintile of publicly reported readmission rates, before vs. after adjusting for a rich set of patient characteristics.  These included self-reported health, functional status, cognition, depressive symptoms, household income and assets, race and ethnicity, educational attainment, and social supports.

Medical Research: What are the main findings?

Response: Our two most important findings were:

1) Patients admitted to hospitals with higher readmission rates are sicker and more socially disadvantaged in a variety of ways than patients admitted to hospitals with lower readmission rates.

2) After adjusting for all measurable patient factors that are not accounted for in standard Medicare adjustments, the difference in readmission rates between hospitals with high vs. low readmission rates fell by nearly 50%.

Medical Research: What should clinicians and patients take away from your report?

Response: There are two direct implications of our findings.

  • First is that hospitals are being penalized to a large extent based on the patients they serve.  Poor quality of care may also may results in readmissions and penalties, as intended by the readmissions reduction program, but this unintended consequence is substantial.
  • Second, as a result of this unintended consequence, the readmissions reduction program may exacerbate health care disparities by disproportionately depleting financial resources from hospitals serving the most disadvantaged patients.

Clinicians and patients should take away that measuring quality in a way that is fair to all is difficult and should incorporate as much social and clinical information about patients as possible. Federal policy has recently been passed that directly addresses these issues.

Medical Research: What recommendations do you have for future research as a result of this study?

Response: There is growing consensus that the risk adjustment methods in the readmissions reduction program need improvement and there are federal studies underway to better understand the effects and appropriateness of adjustment for more patient characteristics in performance programs that involve quality or efficiency measures. This is also an active area of health policy legislation with two recently passed laws and two bipartisan bills currently pending in the House and Senate.

We would note, however, that it is not likely feasible to collect from all Medicare beneficiaries the detailed information necessary for complete and robust risk adjustment in the readmissions reduction program.  Therefore, alternative payment models may need to be considered to minimize unintended consequences of the program on disparities.  For example, instead of holding each hospital to the national average readmission rate, a hospital’s expected rate could be based on its performance during some multi-year baseline period.  Incentives could then be structured to encourage hospitals to improve upon that baseline performance over the next 5 or 10 years.

Broader payment reforms, such as Accountable Care Organization or bundled payment initiatives, may obviate the need for a performance program wedded specifically to readmissions.


Barnett ML, Hsu J, McWilliams J. Patient Characteristics and Differences in Hospital Readmission Rates. JAMA Intern Med.Published online September 14, 2015. doi:10.1001/jamainternmed.2015.4660.

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J. Michael McWilliams MD, PhD and Dr. Michael Barnett MD (2015). Hospitals with Sicker, Socially Disadvantaged Patients Penalized For Patients They Serve 

Last Updated on September 17, 2015 by Marie Benz MD FAAD