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Policy & oversight

80 Percent of Eligible Hospitals Face Medicare Payment Cuts This Year for High Readmission Rates

CMS has penalized 2,334 hospitals under the Hospital Readmissions Reduction Program for fiscal year 2027, the first cycle to factor in Medicare Advantage claims alongside traditional Medicare data.

By the Goodsurance editorial teamOctober 12, 2026

Under the Medicare Hospital Readmissions Reduction Program, CMS reduced payments to 2,334 hospitals for fiscal year 2027, representing 80 percent of eligible facilities. That share is up from 78 percent, or 2,304 hospitals, in fiscal year 2026, continuing a trend of broader reach.

The penalties, which range from near zero to a maximum of 3 percent of Medicare payments, took effect October 1. Ten hospitals are subject to the full 3 percent reduction, down from 15 in the prior year. Most penalized facilities face a cut below 1 percent. About 578 hospitals, or 20 percent of those eligible, received no penalty for fiscal year 2027, down from 22 percent the year before.

For the second straight year, a larger share of U.S. hospitals face a Medicare pay cut because too many patients came back within 30 days of discharge.

Fiscal year 2027 introduces two methodological changes. First, CMS is now calculating excess readmission ratios using claims from Medicare Advantage enrollees in addition to traditional Medicare fee-for-service data, broadening the measurement base for the first time. Second, the performance window has been shortened from three years to two, covering July 1, 2023 through June 30, 2025.

Six clinical categories carry readmission risk under the program: heart attack, heart failure, pneumonia, chronic obstructive pulmonary disease, coronary artery bypass graft surgery, and elective total hip and knee replacement. CMS measures 30-day unplanned returns to the hospital following a discharge for each category.

Created by the Affordable Care Act, the program aims to encourage hospitals to coordinate discharge planning and follow-up care to reduce preventable returns.

In plain words

Medicare reduces how much it pays hospitals when too many patients end up back in the hospital within 30 days of going home. The idea is to push hospitals to plan better before a patient leaves.

For this year, 2,334 hospitals, about 8 out of every 10, will receive a small pay cut from Medicare. That is more than last year. The cut can be tiny or as large as 3 percent of what Medicare pays. Most hospitals face a cut of less than 1 percent.

This is also the first time Medicare used data from Medicare Advantage plans, not only regular Medicare, to judge how hospitals are doing. The six conditions that count are heart attack, heart failure, pneumonia, a lung disease called COPD, heart bypass surgery, and hip or knee replacement.

Source: CMS
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