• R Carter Clement, Caitlin M Gray, Michael M Kheir, Peter B Derman, Rebecca M Speck, L Scott Levin, and Lee A Fleisher.
• Department of Orthopaedic Surgery, University of North Carolina Hospitals, Chapel Hill, North Carolina.
• J Arthroplasty. 2017 Mar 1; 32 (3): 709-713.

BackgroundThe Centers for Medicare & Medicaid Services (CMS) recently imposed penalties against hospitals with above-average 30-day readmission rates following total joint arthroplasty (TJA). Hospitals must decide whether investments in readmission prevention are worthwhile. This study examines the financial incentives associated with unplanned readmissions before and after invocation of these penalties.MethodsFinancial data were reviewed for 2028 consecutive primary TJAs performed on Medicare beneficiaries over a 2-year period at an urban academic health system. Readmission penalties were estimated in accordance with CMS policies.ResultsUnplanned readmissions generated a $4416 median contribution margin. The initial hospitalizations (when the TJA was performed) were financially unfavorable for patients subsequently readmitted relative to those not readmitted due to increased costs of care (P = .002), but these costs were more than outweighed by the increased reimbursement earned during the readmission (P < .001), ultimately making readmitted patients financially preferable (P < .001). Going forward, penalties will be levied for risk-adjusted readmission rates above the national rate of 4.8%. For the institution under review, the penalty per readmission outweighs the financial gains earned through readmission by $12,184, resulting in a net loss from readmissions if the rate exceeds 6.5%. It will be financially optimal to maintain a readmission rate (after risk adjustment) equal to the national average but exceeding that rate will be $7768 more expensive per readmission than undershooting that target.ConclusionIf our results are generalizable, unplanned Medicare readmissions have traditionally been financially beneficial, but CMS penalties outweigh this benefit. Thus, penalties should incentivize institutions to maintain below-average arthroplasty readmissions rates.Copyright © 2016 Elsevier Inc. All rights reserved.

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