Hospitals Face $227 Million in Readmissions Fines, Seek Merger Opportunities

Hospitals across the country are facing a total of $227 million in fines relating to patient readmissions, after being charged with reducing those readmissions under Medicare.

Under the new program, hospitals are being tasked with reducing the number of readmissions that take place within a month of the patient’s release from his or her hospital stay. The penalties hit hospitals in terms of the amount they can receive from Medicare under its reimbursement program for the services covered under the federal program.

In its latest count of hospital readmissions, the Center for Medicare and Medicaid Services has identified 2,225 hospitals that will have payments reduced for one year, starting on October 1, according to analysis compiled by Healthcare Finance News. The maximum possible penalty of 2% will apply to 18 of those hospitals, with 154 facing a 1% reduction in reimbursements.


The average fine is down slightly, with the number of hospitals facing penalties remaining level year over year.

The rising costs hospitals are facing is likely leading to a flurry of hospital mergers, according to a recent New York Times report. Two of the largest for-profit hospital systems—Community Health Systems of Tennessee and Health Management Associates of Florida—are merging in a $7.6 billion deal, while New York City’s Mount Sinai Medical Center is buying the parent company behind two smaller systems.

According to projections from Booz & Company cited in the Times article, there could be as many as 1,000 of the 5,000 hospitals total seeking mergers in the near term; over the next five to seven years.


“There isn’t an independent hospital out there that is not thinking about this,” Gary Ahlquist, a senior partner at Booz, told the Times. “At the top of the list is the question, Who should I merge with?”

Written by Elizabeth Ecker