30-Day Readmissions Cost US Hospitals $26 Billion. Here's the Data.

How the HRRP Penalty Actually Works

The Hospital Readmissions Reduction Program, established by the Affordable Care Act and administered by CMS since FY2013, imposes payment reductions on hospitals with excess readmission rates for six conditions: acute myocardial infarction (AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary disease (COPD), hip and knee replacement (THA/TKA), and coronary artery bypass graft surgery (CABG).

The penalty mechanism is important to understand correctly, because it is frequently mischaracterized: the penalty applies to all Medicare fee-for-service payments, not only readmission-related payments. A hospital with an excess readmission ratio above 1.0 for any of the six conditions has its entire Medicare base operating DRG payments reduced by up to 3%. This means a hospital with $100 million in annual Medicare revenue could lose up to $3 million — not $217,000. The $217,000 average reflects the distribution across hospitals with varying penalty percentages.

Root Causes: What Claims Data Tells Us

Readmission root cause analysis from retrospective claims data has been an active research area since HRRP launched in 2013. The accumulated evidence across multiple large-scale studies — including the JAMA Internal Medicine analysis of 11.9 million Medicare hospitalizations — identifies four primary root cause categories with relatively stable prevalence:

• Medication non-compliance (38%): Patients who did not fill discharge medications or did not take them as directed within the first 7-14 days post-discharge. Most common in HF and COPD readmissions. Identifiable through pharmacy claims data if pharmacy benefits are visible.
• Inadequate post-discharge follow-up (27%): No outpatient visit within 7 days of discharge. The 7-day follow-up rate is now a standalone quality measure and a HRRP risk factor.
• Premature discharge (19%): Discharge before clinical stability criteria were met. This is the most contested category because the line between appropriate and premature discharge is clinically complex.
• Care coordination failure (16%): Breakdown in communication between inpatient, post-acute, and outpatient teams. Most common in patients discharged to skilled nursing facilities.

The LACE Score: Predicting Readmission at Discharge

The LACE index is the most widely validated readmission risk prediction tool in clinical use. It calculates a score from four elements available at the time of discharge:

The LACE score is valuable precisely because it uses data that is available at discharge from any EHR system: length of stay from admit and discharge dates, acuity from the admit source field, comorbidity from the ICD-10 diagnosis list, and ED visit history from encounter data. No specialist calculation is required. Any data analyst can calculate LACE scores from a standard EHR export.

The clinical utility is in the discharge workflow. A patient with a LACE score of 12 should be flagged for intensified discharge planning: a confirmed 7-day follow-up appointment before leaving the unit, a pharmacy reconciliation call within 48 hours, and a care coordinator touchpoint at 72 hours. These interventions have been demonstrated to reduce 30-day readmission rates by 20-35% in high-risk patients.

The 7-Day Follow-Up: The Simplest Intervention With the Strongest Evidence

The Follow-Up After Hospitalization for Mental Illness (FUH) and Follow-Up After Emergency Department Visit for Mental Illness (FUM) measures are HEDIS measures that specifically track 7-day follow-up. But the 7-day follow-up principle extends to all high-risk discharges, not only behavioral health.

The evidence is consistent across multiple health system studies: patients who complete a physician visit within 7 days of hospital discharge have 30% lower 30-day readmission rates compared to patients with no 7-day follow-up. For heart failure patients specifically — the highest-volume HRRP condition — 7-day follow-up completion rates above 80% are associated with readmission rates that fall below the HRRP penalty threshold.

Operationally, achieving 80% 7-day follow-up requires scheduling the appointment before the patient leaves the unit, not after. Discharge without a confirmed follow-up appointment is the most reliable predictor of no 7-day follow-up. This is a process problem, not a patient behavior problem, and it is solvable through systematic discharge workflow changes supported by the right analytics.

Discharge Planning Analytics: Finding the High-Risk Patients Before They Leave

The operational application of LACE scoring and root cause analysis is a discharge planning workflow where high-risk patients are identified before discharge, not after readmission. The data required — admit date, discharge date, ED visit history, ICD-10 diagnoses, admit source — is present in every EHR system's standard data exports.

Vizier's readmission prevention module processes these exports and surfaces a daily list of high-risk discharges with LACE scores calculated, 7-day follow-up status tracked, and CMS penalty exposure calculated based on current excess readmission ratios. The goal is not retrospective reporting of readmission rates — it is prospective identification of patients who need intervention before they become the readmission statistic.

The $26 billion national cost of readmissions is a system-level number. At the hospital level, the question is which patients in today's discharge census are most likely to come back. That question has an answer. It is in your EHR data. Getting that answer in front of the care coordination team before the patient reaches the parking lot is the work.