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Orgs with more MA patients face more readmission penalties

Deeper Medicare Advantage penetration changes the risk pool for hospitals, leading to higher penalties in the Hospital Readmissions Reduction Program, data shows.

Sara Heath
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Published: 28 Jan 2026

Does the Hospital Readmissions Reduction Program penalize hospitals that treat a bigger Medicare Advantage population? Perhaps, according to a report in JAMA Network Open.

The Hospital Readmissions Reduction Program (HRRP) was launched in 2012 to measure and financially reward hospital quality, as measured by excess readmissions. When hospitals have a high proportion of Medicare patients readmitted within 30 days, they stand to lose reimbursement.

This measure is risk-adjusted to account for hospitals that treat a disproportionate share of sicker Medicare beneficiaries. Those risk scores are based on factors like diagnoses, documented conditions and patient age.

But patient health comprises so much more than those observable factors, the researchers pointed out. Social determinants of health like frailty, social support and functional status, plus subtleties in disease severity, can affect risk. However, these elements don't get factored into risk adjustment.

That issue has compounded amid the proliferation of Medicare Advantage (MA) plans, which have grown from 19% market penetration in 2007 to 54% in 2025, the researchers said. When more people join MA, there are fewer people left enrolled in traditional Medicare. The traditional Medicare population is more likely to be sicker, as their healthier peers opt for MA.

But because Medicare only includes traditional Medicare in the HRRP, this could create a problem for hospitals that treat a higher proportion of MA beneficiaries. Although most of their older patients are observably and unobservably healthy, thus skewing their risk adjustment, the folks they treat who are included in HRRP calculations are the sickest of the sick.

MA risk adjustment skews HRRP results

The researchers measured this theory by looking at 3,200 hospitals serving Medicare beneficiaries from fiscal years 2019 to 2022 for six HRRP-targeted conditions (acute myocardial infarction, chronic obstructive pulmonary disease, heart failure, pneumonia, coronary artery bypass graft surgery and elective primary total hip or knee arthroplasty).

Notably, the hospitals with the deepest MA penetration -- meaning they treat more patients enrolled in MA than in traditional Medicare -- saw HRRP penalties that were $30,736 more per hospital per year. This compares to hospitals with the lowest MA penetration, which saw HRRP penalties that were $26,915 less per hospital per year.

Peer grouping, or Medicare's attempt at comparing only hospitals that treat similar groups of patients, doesn't mitigate this penalty disparity, the researchers said.

There are a few policy levers that Medicare can pull to fix this issue, the researchers suggested.

Foremost, Medicare can integrate MA penetration into risk adjustment models. This could help account for variable health across traditional Medicare and MA members. However, risk models are already very complicated, and it could be challenging to help translate these changes to stakeholders.

Second, the researchers recommended using MA penetration to redefine peer groups, meaning it could change which hospitals are compared to each other. This could help mitigate numerous types of patient risk factors.

However, peer groups require setting cutoffs or thresholds for certain characteristics, such as quintiles of MA penetration. For hospitals right above or below a quintile, this could create very big penalty differences despite similarity between the hospital populations.

Still, the researchers said there is an opportunity to bring more fairness to the HRRP program. These methods warrant policymaker attention, they concluded.

Sara Heath has reported news related to patient engagement and health equity since 2015.

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