On orders from Congress, Medicare is easing up on its annual readmission penalties on hundreds of hospitals serving the most low-income residents, records released last week show.?

Since 2012, Medicare has punished hospitals for having too many patients end up back in their care within a month. The government estimates the hospital industry will lose $566 million in the latest round of penalties that will stretch over the next 12 months. The penalties are a signature part of the Affordable Care Act's effort to encourage better care.

Medicare benefits

But starting next month, lawmakers mandated that Medicare take into account a long-standing complaint from safety-net hospitals. They have argued that their patients are more likely to suffer complications after leaving the hospital through no fault of the institutions, but rather because they cannot afford medications or don't have regular doctors to monitor their recoveries.

The Medicare sanctions have been especially painful for this class of hospitals, which often struggle to stay afloat because so many of their patients carry low-paying insurance or none at all.

In a major change to its evaluation, the federal Centers for Medicare & Medicaid Services (CMS) this year ceased judging each hospital against all others. Instead, it assigned hospitals to five peer groups of facilities with similar proportions of low-income patients.

Medicare then compared each hospital's readmission rates from July 2014 through June 2017 against the readmission rates of its peer group during those three years to determine if they warranted a penalty and, if so, how much it should be.

The broader issue is whether medical providers that serve the poor can be fairly judged against those that care for the affluent. This has been a continuing topic of contention as the government seeks to measure health care quality accurately. It is particularly a concern in efforts to consider patient outcomes in setting pay rates for doctors, nursing homes, hospitals, and other providers.

Overall, Medicare will dock payments to 2,599 hospitals more than half in the nation— throughout the fiscal year 2019, which begins Oct. 1, a Kaiser Health News analysis of the records found.

The harshest penalty is 3% lower reimbursements for every Medicare patient discharged in the fiscal year 2019. The number of hospitals and the average penalty 0.7% of each payment is almost the same as last year.

But the new method shifted the burden of those punishments. Penalties against safety-net hospitals will drop by a fourth on average from last year, the analysis found.