The number of hospitals penalized under Medicare's Hospital Readmissions Reduction Program continues to climb. According to new CMS data, 80% of hospitals — 2,334 facilities — are having Medicare payments reduced for fiscal 2027, up from 78% (2,304 facilities) in 2026. The penalties took effect Oct. 1 and are the first calculated using data that includes Medicare Advantage beneficiaries.
The program, created under the Affordable Care Act, reduces payments to hospitals with higher-than-average readmissions for conditions such as heart attack and pneumonia. Penalties can reach a 3% loss of payment, though most affected hospitals face a cut below 1%. Just 10 hospitals received the maximum penalty, down from 15 in 2026, while 578 hospitals — about 20% — avoided any penalty, a slightly worse result than the 22% that avoided penalties in 2026.
This is the second straight year of worsening results for hospitals. Research suggests the program has substantially reduced avoidable readmissions and saved Medicare billions, without raising patient mortality. However, critics remain concerned about the impact on safety-net hospitals and argue that some apparent improvement may stem from changes in how hospitals track patients rather than genuine gains in care quality.