Payment
Payment
The payment reduction is the percentage a hospital’s payment will be reduced based on a hospital’s performance in the Hospital Readmissions Reduction Program. The payment reduction is a weighted average of a hospital’s performance across the readmission measures during the Hospital Readmissions Reduction Program performance period (July 1, 2023, to June 30, 2025, for fiscal year [FY] 2027). The payment adjustment factor is the form of the payment reduction the Centers for Medicare & Medicaid Services (CMS) uses to reduce hospitals’ payments. CMS applies the payment adjustment factor to all Medicare fee-for-service (FFS) base operating diagnosis-related group (DRG) payments during the FY. The maximum payment reduction is 3 percent (that is, the payment adjustment factor equals 1.0 minus the payment reduction percentage, or 0.97 for the maximum payment reduction). Hospitals with higher payment adjustment factors have lower payment reductions. For FY 2027, the payment adjustment factors are applied to all Medicare FFS base operating DRG payments from October 1, 2026, to September 30, 2027. The payment reduction is not applied to Medicare Advantage (MA) payments.
Payment Reduction Percentage
The payment reduction is the percentage a hospital’s payments will be reduced, while the payment adjustment factor is the form of the payment reduction CMS uses to reduce a hospital’s payments. A hospital’s payment reduction percentage and payment adjustment factor are available in the hospital’s Hospital-Specific Report (HSR) and publicly reported in the Inpatient Prospective Payment System/Long-Term Care Hospital Prospective Payment System (IPPS/LTCH PPS) Final Rule Hospital Readmissions Reduction Program Supplemental Data File on CMS.gov after the end of the Review and Correction period.
Example: Hospital A has a payment reduction percentage of 2.5 percent. To determine the payment adjustment factor, subtract Hospital A’s payment reduction percentage from 1.0:
1.0 – 0.0250 = 0.9750 payment adjustment factor
More information about the payment reduction is available on the Resources page of the QualityNet website. The Hospital Readmissions Reduction Program Payment Reduction Methodology Infographic illustrates the payment reduction calculations. The Key Dates document includes program-specific dates (for example, the performance period).
During the Review and Correction period, hospitals can review the data in their HSR and replicate their payment reduction and component results. More information on this process is available on the Review and Correction page of the QualityNet website.
Review & Correction Process
The Centers for Medicare & Medicaid Services (CMS) provides hospitals with detailed Hospital Readmissions Reduction Program data and results in confidential Hospital-Specific Reports (HSRs). CMS gives hospitals 30 days to review their Hospital Readmissions Reduction Program data as reflected in their HSR, submit questions about their results, and request a correction if they identify calculation errors. The Review and Correction period does not allow hospitals to submit corrections related to underlying claims data or add new claims to the data extract CMS used to calculate the results. CMS cannot recalculate results based on updated Medicare fee-for-service (FFS) claims, hospital-submitted Medicare Advantage (MA) claims, or Medicare Advantage Organization (MAO)-submitted encounter data.
NOTE: The Review and Correction period for the Hospital Readmissions Reduction Program is only for discrepancies related to the calculation of the payment reduction and component results.
The Review and Correction period begins the first full business day following when HSRs are made available in the Hospital Quality Reporting (HQR) system. For fiscal year (FY) 2027, the 30-day Review and Correction period extends from September 2, 2026, to October 1, 2026.
The Hospital Readmissions Reduction Program HSR contains a hospital’s payment reduction and component results. Hospitals can replicate these results by referring to the instructions in the FY 2027 Hospital Readmissions Reduction Program HSR user guide on the Reports page of the QualityNet website.
Requesting a Review of Calculations
If a hospital identifies potential discrepancies in its payment reduction and component results, it can request a review of the calculations using the QualityNet Question and Answer Tool no later than 11:59 p.m. PT on October 1, 2026. Hospitals should select “HRRP - Hospital Readmissions Reduction Program” from the program list, choose “HRRP review & correction request” as the topic, and include the following information:
- CMS Certification Number (CCN)
- Hospital's name
- Payment reduction and components for review with a description of each calculation discrepancy:
- Payment adjustment factor
- Dual stays
- Dual proportion
- Peer group assignment
- Neutrality modifier
- Excess readmission ratios (ERRs) – Include all that apply
- Peer group median ERR(s) – Include all that apply
More information on Hospital Readmissions Reduction Program calculations is available in the FY 2027 Hospital Readmissions Reduction Program Frequently Asked Questions document and Payment page of the QualityNet website.