Revisiting Readmissions — Changing the Incentives for Shared Accountability

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Abstract
When legislation was enacted in 1983 establishing prospective payment for hospitals, the incentives for hospitals changed dramatically. Cost-based payments for hospital days and services were replaced with a set payment per admission that was based on the patient's diagnosis-related group. The goal of the legislation was to encourage shorter lengths of stay and more efficient care, but policymakers were also concerned about possible increases in readmissions. Higher rates of readmissions, they thought, might be a consequence of the legislation either because patients might be prematurely discharged from the index hospitalization or because services might be “unbundled” by hospitals in an attempt to receive two separate payments for what could have been a single clinical episode. Although little evidence emerged to substantiate either concern, today — two and a half decades later — policymakers are focused on readmissions again, albeit for very different reasons.