A Comparison of Estimated Cost Savings from Potential Reductions in Hospital-Acquired Conditions to Levied Penalties Under the CMS Hospital-Acquired Condition Reduction Program

Abstract

Background: The Hospital-Acquired Condition Reduction Program (HACRP) from the Centers for Medicare & Medicaid Services (CMS) reduces Medicare payments to hospitals with high rates of hospital-acquired conditions (HACs) by 1% each year. It is not known how the savings accruing to CMS from such penalties compare to savings resulting from a reduction in HACs driven by this program. This study compares the reported savings to CMS from financial penalties levied under the HACRP with savings resulting from potential reductions in HACs.

Methods: Using a random sample of 20% of Medicare claims data (January 1, 2009-September 30, 2014), the research team evaluated the association between HACs and 90-day episode spending (adjusted to 2015 dollars), then estimated potential annual savings to CMS if there was a relative decrease in incidence of all HACs by 1%-20%. These savings were then compared to the actual collected HACRP penalties reported by CMS in 2015.

Results: All HACs were associated with significant increases in total 90-day episode spending, ranging from $3,183 for iatrogenic pneumothorax to $21,654 for postoperative hip fracture. The total estimated savings to Medicare from potential reduction in all HACs ranged from $2.2 million to $44 million per year, an amount much lower than the $361 million in penalties levied on hospitals per year for HACs.

Conclusion: The penalties levied under the HACRP far exceed the potential cost savings accruing from a 1%-20% reduction in HACs that might result from hospitals' efforts in response to the program.