Social Risk Adjustment Reduced HRRP Penalties for Safety-Net Hospitals

Using social risk adjustment in Medicare’s Hospital Readmissions Reduction Program (HRRP) helped reduce differences in risk-adjusted readmissions and penalties between safety-net hospitals and other hospitals, according to a systematic review published in Health Affairs.

Under the HRRP, hospitals receive penalties if their all-cause 30-day readmission rates exceed the average among hospitals with similar patients. CMS adjusts readmission rates for patient age, sex, and comorbidities, defined by researchers as the CMS base risk-adjustment model.

Safety-net hospitals, which serve more vulnerable patient populations, received greater penalties under the CMS base risk-adjusted model.

The 21st Century Cures Act of 2016 helped introduce social risk adjustment to the HRRP. The law required CMS to use peer grouping to measure hospital performance, which compares hospitals that serve similar proportions of low-income patients.

Researchers analyzed 14 peer-reviewed studies to determine how social risk adjustment impacts readmission rates and HRRP penalties.

Ten studies compared the CMS base risk-adjustment model to an augmented model that included social variables at the patient, community, or hospital level. Two studies compared the HRRP peer-grouping method with the CMS base risk-adjustment model. Two other studies compared peer grouping with an augmented risk-adjustment model with peer grouping alone.

The studies included a range of social variables, including education, income, homelessness, and housing instability. The most common factor included was dual eligibility for Medicaid and Medicare.

Seven studies found that adding additional social risk factors to the CMS base risk-adjustment model reduced differences in readmission rates and related outcomes between hospitals serving high levels of socially vulnerable patients and other hospitals.

One study estimated that including social and clinical risk factors explained 83 percent of the difference in adjusted readmission rates between the uppermost and lowermost quintiles of hospitals categorized by the proportion of dually eligible patients served.

Other studies found that the distribution of penalties changed with social risk adjustment.

For example, one study found that adjusting for dual eligibility, housing instability, Medicare eligibility due to disability, and an area-level socioeconomic status index would decrease annual aggregated readmission penalties by $17 million for the 20 percent of hospitals serving the greatest number of dually eligible patients.

Another study found that readmission penalties would fall by 0.63 percentage points for the 10 percent of hospitals most affected by the adjustments.

Researchers also observed that the peer-grouping method helped reduce HRRP penalties for safety-net hospitals.

According to one study, in the first year of peer grouping, penalties among the 40 percent of hospitals serving the highest proportion of dual eligibles decreased by around $436,000 compared to penalties under the CMS base risk-adjustment model. In contrast, penalties were higher for hospitals serving fewer dually eligible patients.

Using the peer-grouping method and a risk-adjustment model with social risk factors led to more significant reductions for safety-net hospitals, one study found.

There are some concerns that adjusting for social risk factors may overlook the quality of care provided in hospitals. However, two studies included hospital-level effects on care and determined that higher readmission rates at safety-net hospitals were attributed to patient social risks, not hospital characteristics.

The systematic review suggests that CMS could improve its social risk adjustment in the HRRP if they consider additional social risk factors. Through this, the agency could also help address health equity by limiting penalties for providers who serve vulnerable patients.

“Lessons learned from the HRRP can be extended to other value-based payment programs, and evolving policies to evaluate health equity can promote advances in social risk adjustment,” researchers wrote.