Reducing readmissions: A business case for US hospitals

Abstract

The 2010 Patient Protection and Affordable Care Act (ACA) linked acute care hospital reimbursements to quality-of-care measures. While the impact of healthcare quality on service provision is well-documented, the effects of 30-day readmissions on hospital financial performance are less understood. This study examines the relationship between 30-day readmission rates and financial performance in U.S. acute care hospitals from 2010 to 2018 using four financial metrics: operating margin, operating revenue, operating cost, and total margin. Data were sourced from the American Hospital Association (AHA) Annual Survey, Centers for Medicare and Medicaid Services (CMS), Area Health Resource Files (AHRF), and CMS cost reports. Univariate analysis of hospital characteristics was followed by an unbalanced panel regression with hospital and year-fixed effects. Inflation adjustments and controls for HRRP, CMI, managed care penetration, payer mix, physician supply, RN and MD staffing, occupancy, and mortality rates were applied. Increased readmission scores for AMI correlated with higher adjusted operating revenues per patient day (β = $26.86, p ≤ .001), but no significant changes in adjusted operating cost, operating margin, or total margin. Following HRRP implementation, adjusted operating revenue decreased for AMI (β = $425.21, p ≤ .019), HF (β = $229.41, p ≤ .023), and PN (β = $229.41, p ≤ .023). HF readmission scores marginally increased the adjusted operating margin (β = $0.0002, p ≤ .064) with no significant impact on other financial metrics. Pneumonia readmission rates marginally increased the adjusted operating margin (β = $0.0002, p ≤ .064) without significantly affecting other financial measures. The study’s findings highlight the potential financial benefits of reducing readmissions for hospitals. However, it also underscores the importance of developing and implementing broader quality metrics that can provide a more comprehensive evaluation of hospital performance, thereby enhancing the audience’s understanding of the need for a comprehensive evaluation of hospital performance.