The penalties are based on the frequency with which Medicare patients suffering from heart failure, heart attack, and pneumonia were readmitted within 30 days between July 2008 and June 2011. Medicare took into account how sick the patients were when calculating whether the rates were higher than those of the typical hospital, but not their racial or socioeconomic background.
Hospitals say that, in recent years, they have embraced new programs to reduce readmissions through intensive follow-ups, coordination with pharmacists and family doctors, and in-home services. Such programs are in effect at Cooper University Hospital in Camden, which is being penalized nearly the maximum 1 percent for its readmissions.
In a statement, Cooper noted that hospitals are faulted even if the readmission is for a problem unrelated to the original admission, or even if the readmission is to a different facility "and the original facility/physician isn't aware."
Nearly two million Medicare beneficiaries are readmitted within 30 days of release each year, costing Medicare an additional $17.5 billion. The nation's average readmission rate has held steady at just over 19 percent for several years, even as many hospitals have worked harder to lower theirs.
Starting Oct. 1, the penalty will be deducted from reimbursements each time a hospital submits a claim. For example, if a hospital received the maximum penalty of 1 percent and submitted a claim for $20,000 for a surgical stay, Medicare would deduct $200 and reimburse $19,800.
The penalties, authorized by the 2010 health law, are part of a big effort by Medicare to use its financial muscle to force improvements in quality of care. In a few months, hospitals will be penalized or rewarded based on how well they adhere to basic standards of care and how patients rate their experiences.
Overall, Medicare has decided to penalize about two-thirds of the hospitals whose readmission rates it evaluated, records show.
The penalties will fall heaviest on hospitals in New Jersey, New York, the District of Columbia, Arkansas, Kentucky, Mississippi, Illinois, and Massachusetts, a Kaiser Health News analysis of the records shows.
New Jersey's 64 hospitals have an average readmission penalty of 0.67 percent, the highest in the country. In Pennsylvania, with 153 hospitals, the average penalty is 0.35 percent, well above the national average of 0.28 percent.
Of the 278 hospitals nationally that will lose the maximum penalty of 1 percent, several are top-ranked, including Hackensack University Medical Center in New Jersey, and Beth Israel Deaconess Medical Center in Boston, a teaching hospital of Harvard Medical School.
Another top-tier institution, the University of Pennsylvania Health System, incurred almost no penalty at its flagship Hospital of the University of Pennsylvania and at Penn Presbyterian Medical Center, both in West Philadelphia. Yet its Center City facility, Pennsylvania Hospital, has a 1 percent penalty.
P.J. Brennan, the system's chief medical officer, said all three hospitals had had success preventing readmissions in the weeks after discharge; then patients' social and financial problems "kick in."
"A lot of patients who need home care refuse it," Brennan said. "Why? They get hit with copays for every visit, or they're stubborn, or they don't want a stranger to see" their home's bad condition.
The maximum penalty will increase after this year, to 2 percent of regular payments starting in October 2013 and then to 3 percent the next year.
This year, the $280 million in penalties constitute about 0.3 percent of the total amount Medicare pays hospitals.
According to Medicare records, 1,933 hospitals will receive penalties of less than 1 percent; the total number of hospitals receiving penalties is 2,211. Massachusetts General Hospital in Boston, which U.S. News last month ranked as the best hospital in the country, will lose 0.5 percent of its Medicare payments because of its readmission rates, the records show.
In South Jersey, readmission-reduction measures succeeded at the Virtua health-care system's Mount Holly hospital, which has 0.1 percent penalty. Those measures are now being expanded to Virtua's three other hospitals, which have a 0.71 percent penalty, Virtua executive vice president James Dwyer said.
The penalties are controversial. Studies have found that African American patients are more likely to be readmitted than others, leading some experts to worry that hospitals that treat many blacks will end up being unfairly punished.
Some safety-net hospitals that treat large numbers of low-income patients have higher readmission rates, which the hospitals attribute to the lack of access to doctors and medication those patients often face after discharge. The Kaiser analysis of the penalties showed 76 percent of the hospitals that treat lots of low-income patients will lose Medicare funding in the fiscal year that starts in October.
Atul Grover, chief public policy officer of the Association of American Medical Colleges, called Medicare's new penalties "a total disregard for underserved patients and the hospitals that care for them."
Medicare disagreed, declaring that "many safety-net providers and teaching hospitals do as well or better" than hospitals without many poor patients. Safety-net hospitals that are not being penalized include the University of Mississippi Medical Center in Jackson and the Denver Health Medical Center in Colorado, the records show.
Jordan Rau can be reached at firstname.lastname@example.org. Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.
Inquirer staff writer Marie McCullough contributed to this article.