The maximum payment reduction under the Hospital Readmissions Reduction Program is 3%. CMS expresses this through a payment adjustment factor ranging from 1.0, indicating no reduction, to 0.97, representing the maximum 3% reduction.

The HRRP links Medicare payment to excess readmission performance for specified clinical populations. CMS applies the resulting adjustment to applicable Medicare fee-for-service base operating DRG payments.

This program should not be confused with other Medicare hospital quality-payment initiatives. The HAC Reduction Program imposes a 1% reduction on hospitals in the worst-performing quartile, while Hospital Value-Based Purchasing uses a 2% reduction-and-redistribution mechanism.

CMS's FY 2026 IPPS final rule also finalized changes to HRRP methodology that begin with the FY 2027 program year, including incorporation of Medicare Advantage data into the six readmission measures and shortening the applicable performance period from three years to two.

For CDI, the central obligation remains ensuring that the clinical record accurately portrays patient severity, conditions treated, discharge circumstances, and comorbid disease burden.

CCDS Reference Topics: HRRP; readmission measures; quality reimbursement; payment adjustments; risk adjustment.

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