How does Medicare use HRRP to influence hospital payments?

• A. It reduces prospective payments to hospitals with higher readmission rates for the specified diagnoses
• B. It increases payments to hospitals with better performance
• C. It provides grants to hospitals to improve readmissions
• D. It ignores readmission rates in payment calculations

Answer: (A)

Medicare uses the Hospital Readmissions Reduction Program to financially motivate hospitals to lower avoidable 30-day readmissions for specific conditions. If a hospital’s observed readmission rate within 30 days after discharge for those diagnoses is higher than what is expected (after risk adjustment), Medicare reduces the hospital’s payments under the inpatient prospective payment system for that fiscal year. This penalty style incentive encourages hospitals to strengthen discharge planning, care transition processes, and post-discharge follow-up to prevent unnecessary return visits. The program does not increase payments, nor does it provide grants, and it explicitly uses readmission data to adjust payments.