But some hospitals are located in impoverished areas, and many of their patients cannot afford to buy medication or healthy food, or they lack transportation to attend checkups with primary-care doctors.
The CMS reported to Congress in December that hospitals with high rates of patients eligible for both Medicare and Medicaid, who tend to be both poor and very ill, were most penalized under the quality improvement program,
In December, safety net providers said the provision in the 21st Century Cures Act—a bill that was initially aimed at biomedical innovation but was turned into a smorgasbord of healthcare policies—would compel the CMS to take into account the socio-demographic makeup of patients.
Some policy experts, however, warned that the effectiveness of risk adjustment depended on the details of its implementation, which were scant in the legislation.
Starting Oct. 1 of next year, the CMS will assess penalties based on a hospital's performance relative to other hospitals with a similar proportion of patients who are dually eligible for Medicare and full-benefit Medicaid.
Those patients are often expensive to serve, accounting for nearly a third of total Medicare fee-for-service spending in 2012 despite constituting only 18% of beneficiaries, according to the Medicare Payment Advisory Commission.
But the law failed to specify how providers would be compared to one another.
After assessing the impact of those changes, the CMS in a final inpatient pay rule admitted little would change as far as the overall percentage of hospitals being penalized.
It predicted fewer rural hospitals would see cuts, with the rate dropping from 0.64% to 0.61%. The percentage of safety-net hospitals, which are often found in poor communities with predominantly black or Latino residents, facing penalties would drop to 54% from 63%.
Hospitals not eligible for disproportionate-share payments, which are funds paid to help offset the costs of high numbers of low-income and uninsured patients, would see an increase to 65% being penalized compared with 59%.
Quality measure developers were pleased that any progress would be made under the change.
"Even small gains in leveling the playing field for all hospitals are an important step in the right direction to making care more accessible and affordable for all patients," said Dr. Shantanu Agrawal, CEO of the National Quality Forum.
The CMS did not offer any reason for its findings, only saying it came to its conclusion by using historical Medicare claims data.
Maryellen Guinan, senior policy analyst at America's Essential Hospitals, said this conclusion demonstrates that more work is needed to level the playing field. Her group is urging the CMS to incorporate risk adjustment for socio-demographic status, language and post-discharge support structure.
The National Rural Health Association is also pushing the CMS to work harder to avoid penalizing hospitals with high-risk populations. The group's members believe their patients are more likely to struggle given few provider options, little or no public transportation and the long distances many must travel. Diane Calmus, the group's government affairs and policy manager, said the CMS is not taking into account "the true socio-demographic risk adjustment that is needed in the readmissions penalty policy."
Akin Demehin, director of policy at the American Hospital Association, said her group is urging the CMS to re-evaluate and regularly update its approach to addressing patient disparities.
Researchers have yet to figure out how to reliably predict the impact of patient demographics and socio-economic status.