A February 24, 2016 Article from The New England Journal of Medicine — Readmissions, Observation, and the Hospital Readmissions Reduction Program talks about the decrease in hospital readmissions for targeted conditions (CHF, pneumonia, and acute myocardial infarction.)

The article states that data shows that readmission rates dropped significantly at US Hospitals between 2007 and 2015.  During that same time observations admissions increased.  Many researchers surmised that hospitals were just gaming the system and using observation status to decrease readmissions as was reported in Health Affairs  in October 2015

Details of the study include the percent of patients held in observation status increased from 2.6% in 2007 to 4.7% in 2015 for targeted therapies. (2.5%to 4.2% for all patients.)  During the same period readmission rates decreased from 21.5% in 1007 to 17.8% in 2015 for targeted conditions (15.3% to 13.1% for all patients.)

Even with improvements, 75% of hospitals were penalized.  Fines ranged from 0.01% to 3% of base DRG payments would total $420M in 2016.

Many argue social factors are beyond a hospital’s control and unfairly hurt some of the facilities in poor communities.  Understanding social factors including race, gender, socio-economic and health literacy are complicated issues. Location was felt to be one of the main factors in readmission rates 

Additional articles and studies can be found in studies at Henry Ford and the October 2012 Health Affairs and January 2016 report from the National Academies of Sciences

In 2013, the National Quality Forum, a not-for-profit that works with the federal government to evaluate the quality of measures used in federal reporting programs, convened an expert panel, to recommend which social factors should be used in risk-adjustment for performance measures. The following year the group changed its rules to allow measures to be adjusted for patients who are poor, homeless and illiterate and announced plans to examine the impact of socio-economic factors.

Source: Readmissions, Observation, and the Hospital Readmissions Reduction Program — NEJM