About 80% of hospitals are having their Medicare payments shaved down because of the Hospital Readmissions Reduction Program this fiscal year, compared to 78% the year prior, according to CMS data.

The Hospital Readmissions Reduction Program (HRRP) was created by the Affordable Care Act with the hope that penalizing hospitals with higher-than-average readmissions for conditions like heart attack and pneumonia would incentivize operators to prevent avoidable patient returns.

The program tracks data from Medicare beneficiaries and bases penalties on outcomes from prior years. The fiscal 2027 penalties are based on Medicare data from the summer of 2023 through the summer of 2025.

Penalties can reach up to a 3% loss of payment, though the lion’s share of impacted facilities are facing a hit lower than 1%.

For 2027, just 10 hospitals are subject to the maximum 3% penalty, down from 15 in 2026. And 578 hospitals, or about 20% of facilities, will receive no penalty — though, that’s worse than 2026, in which 22% of facilities avoided a penalty altogether.

It’s the second straight year of worsening results for U.S. hospitals, after more hospitals were subject to penalties in 2026 compared to 2025.

The HRRP led to a substantial reduction in admissions after being implemented in 2012, as the penalties led hospitals to invest in discharge planning, patient education and site-of-care transitions, research suggests. Cutting back avoidable readmissions saves Medicare billions of dollars each year. And curbing readmissions hasn’t negatively impacted patient mortality, according to research.

Still, the HRRP has been controversial, with stakeholders worried that the penalties were adversely hitting safety-net hospitals, which tend to manage sicker and more disadvantaged patients.

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