Pharmacy OneSource Blog

The Impact of the Affordable Care Act on Reducing Readmissions

Measuring the efficacy of healthcare providers through the metric of readmissions has proven controversial when placed in the broader context of the political debate over the Affordable Care Act (ACA). The numerous facets of the ACA include the Hospital Readmissions Reduction Program (HRRP), which reduces payments from the Centers for Medicaid and Medicare Services (CMS) to healthcare providers that exceed a particular number of readmitted patients for conditions such as acute myocardial infarction, heart failure and pneumonia.

While proponents of the legislation have argued that there has been a demonstrable decrease in readmissions since the ACA went into effect, detractors have claimed that the perceived decrease in readmissions is actually a matter of providers re-categorizing readmissions as “observation stays” to avoid financial losses. But a recent study1 confirms that real readmissions, not merely reported ones, are indeed decreasing under the ACA.

Detractors have claimed that a recent increase in observation stays has correlated with the implementation of the ACA, proving that providers are engaged in a self-saving slight-of-hand to avoid losing funds. However, the recent study published in The New England Journal of Medicine found that an increase in observations stays does not match up with the decrease in readmissions.

The study indicated that the trend of increasing observation stays began in 2008, two years before the ACA was signed into law in March 2010. Furthermore, reduced payments on the basis of readmissions were only implemented for discharges from hospitals beginning on October 1, 2012.2 If  providers were simply re-categorizing readmissions as observations stays to avoid penalties, one would have seen a spike correlated shortly after the changes were announced, or after the HRRP was actually implemented, not a few years earlier. The article also indicated that observation stays still constitute a relatively small number of hospital visits.

An article that details the study on HHS.gov3 notes that both readmissions and observations stays have continued to decrease year-over-year since the implementation of the ACA.

The numbers suggest that the incentives provided by the ACA are helping to reduce readmissions. This speaks well of the potential for smart incentives from CMS to guide the busy healthcare system into offering more effective, better treatment while simultaneously making better use of human and financial resources.

The HRRP is not the only feature of the ACA that seeks to improve healthcare provider efficacy through incentives based on quantifiable data points. Providers, government agencies, and medical trade groups are now working together to find the places where providers could function better and to discover new ways to combine high-tech monitoring solutions, big data analytics, and financial incentives to increase the quality of care and meet the ever-evolving needs of the fast-paced healthcare landscape.  


  1. Caspi, Heather. HHS study finds reduced readmissions real, not masked as observation stays. Healthcare DIVE. February 29, 2016:
  2. Centers for Medicare & Medicaid Services. Readmission Reductions Program (HRRP). Accessed March 24, 2016: :
  3. Zuckerman, Rachel. Reducing Avoidable Hospital Readmissions to Create a Better, Safer Health Care System.  U.S. Department of Health & Human Services. February 24, 2016:

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