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The Hospital Readmission Reduction Program (HRRP) disproportionately penalizes hospitals serving minority communities. The National Academy of Science, Engineering, and Medicine has recommended that the Centers for Medicare and Medicaid Services (CMS) consider adjusting for social risk factors in their risk adjustment methodology. This study examines the association between the racial and ethnic composition of a hospital market and the impact of other social risk factors on the probability of a hospital being penalized under the HRRP.This study analyzes data from CMS, the American Hospital Association, and the American Community Survey for 3168 hospitals from 2013 to 2017. We used logistic regression models to estimate the association between the penalty status under HRRP and the racial and ethnic composition of a hospital market, and explored whether this association was moderated by other social risk factors.Our results indicate that the probability of being penalized increases with the percentage of black and Asian residents in the hospital service area (HSA) and decreased with the percentage of Hispanic residents in the HSA. This association was reduced and became statistically insignificant when we controlled for other social risk factors. The strongest predictors of penalty status were the hospital’s share of Medicaid patients and the percent of persons without a high school diploma in the HSA.By incorporating relevant social risk factors in the reimbursement methodology, CMS could mitigate the negative effects of HRRP on hospitals serving minority communities.