As the penalties have played out, an increasing number of prominent experts are voicing concerns that the punishments are too harsh and doled out unfairly. For one thing, Medicare lowers payments to hospitals even if they have reduced their readmission rates from the previous year—so long as their rate is still higher than what the government believes is appropriate for that hospital. Medicare uses the national readmission rate to help decide what appropriate rates for each hospital, so to reduce their fines from previous years or avoid them altogether, hospitals must not only reduce their readmission rates but do so better than the industry did overall.

"You have to run as fast as everyone else to just stay even," Foster said. Only 129 hospitals that were fined last year avoided a fine in this new round, the KHN analysis found.

Medicare officials, however, consider the competition good motivation for hospitals to keep on tackling readmissions and not to become complacent with their improvements.

Another concern about the program is that safety-net hospitals that treat large numbers of low-income patients have been more likely to receive penalties, in part because poor patients face financial and logistical challenges that make them more likely to get sicker after discharge than others, even if the hospital is trying to oversee their recuperations.

Much of the formula that calculates the fines was written into the health law, and Medicare has maintained it cannot unilaterally change it. The Medicare Payment Advisory Commission, which makes recommendations to Congress, has urged that the government compare hospitals to similar ones—academic medical centers to each other, for instance—when assessing penalties.

Experts convened by the National Quality Forum, a nonprofit that evaluates measures the government uses, also endorsed the idea of taking socio-economic status into account in creating many different health care metrics. The forum said it will test the approach. Meanwhile, bills are pending in both houses of Congress that would make Medicare consider socio-economic status of a hospital’s patients when calculating fines.

The Obama administration has raised concerns that assuming safety-net hospitals will do poorer in avoiding readmissions might encourage lower expectations for the quality of care for low-income patients. Some experts fear that hospitals with many readmissions are providing substandard care and should not be let off the hook.

"Low [socio-economic status] patients do often—but not always—have worse outcomes, and yet we know they are often exposed to lower quality of care, whether that's the places that they go or the access to care that have," said Dr. Susannah May Bernheim, director of quality measurement at the Yale School of Medicine’s Center for Outcomes Research and Evaluation, which created the method Medicare uses to count readmissions. However, she said, "it is important to understand that safety net providers both may be more vulnerable to payment penalties and may in fact need more than average resources to achieve good outcomes for their patients."

'It's A Quagmire'

A study published this month in The Joint Commission Journal on Quality and Patient Safety examined eight safety-net hospitals to see how they were handling readmissions. The researchers found that most of the hospitals’ leaders were concerned about the penalties, with one telling interviewers that they expected “the penalty will get bigger and bigger and then other payers [such as private insurance companies] are going to pick up on it.”

The program was popular among nurses and doctors, with one saying "we understand, we know the importance of it," that "in order to get a response from administration, you have to penalize."

The researchers, led by Dr. Karen Joynt and other current and former academics at Harvard’s school of public health and the medical school, discovered that one of the eight hospitals was not trying to cut readmissions because its financial stability would be undermined by fewer patients.  "It's a quagmire," an anonymous hospital official was quoted in the study as saying. "If you affect the population correctly, you will reduce both readmissions and overall admissions, which is good for the patient but financially bad for the hospital."

Gina Kaurich, director of client-care services at the Cincinnati-based FirstLight HomeCare, one of many companies offering to help hospitals prevent readmissions, said she has seen hospitals take various approaches in light of the penalties. Some have tried to care for returning patients without readmitting them overnight so Medicare does not count their cases, she said. Others have assigned their own nurses to visit patients at home shortly after discharge to ensure the patients are properly taking care of themselves. Still others hire private companies like hers, which sends nurse assistants to homes.

"Before the penalties and the focus, I believe the hospitals were quite well aware of this, and a readmission almost was something that was expected," Kaurich said. "It was [considered] part of the disease process."

This article was reprinted from kaiserhealthnews.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

Read more about this story's methodology, view the average impact on each state, and download hospital data as a printable PDF or CSV spreadsheet.

This article was produced by Kaiser Health News with support from The SCAN Foundation.