(a) For discharges occurring on and after July 1, 2010, Medicaid rates of payment to hospitals that have an excess number of readmissions as defined in accordance with the criteria set forth in subdivision (c) of this section, as determined by a risk adjusted comparison of the actual and expected number of readmissions in a hospital as described by subdivision (d) of this section, shall be reduced in accordance with subdivision (e) of this section.

1. (1) Potentially preventable readmission (PPR) shall mean a readmission to a hospital that follows a prior discharge from a hospital within 14 days, and that is clinically-related to the prior hospital admission.
2. (2) Hospital shall mean a general hospital as defined pursuant to section 2801 of the Public Health Law.
3. (3) Observed rate of readmission shall mean the number of admissions in each hospital that were actually followed by at least one PPR divided by the total number of admissions.
4. (4) Expected rate of readmission shall mean a risk adjusted rate for each hospital that accounts for the severity of illness, APR-DRG, and age of patients at the time of discharge preceding the readmission.
5. (5) Excess rate of readmission shall mean the difference between the observed rates of potentially preventable readmissions and the expected rate of potentially preventable readmissions for each hospital.
6. (6) Behavioral health shall mean an admission that includes a primary or secondary diagnosis of a major mental health related condition, including, but not limited to, chemical dependency and substance abuse.

7. (7) Managed care encounter data shall mean claims-like data that describes services provided by managed care plans to their enrollees.

   (c) Readmission criteria.

8. (1) A readmission is a return hospitalization following a prior discharge that meets all of the following criteria:

   1. (i) The readmission could reasonably have been prevented by the provision of appropriate care consistent with accepted standards in the prior discharge or during the post discharge follow-up period.

   2. (ii) The readmission is for a condition or procedure related to the care during the prior discharge or the care during the period immediately following the prior discharge and including, but not limited to:

      1. (a) The same or closely related condition or procedure as the prior discharge.
      2. (b) An infection or other complication of care.
      3. (c) A condition or procedure indicative of a failed surgical intervention.
      4. (d) An acute decompensation of a coexisting chronic disease.
   3. (iii) The readmission is back to the same or to any other hospital.

9. (2) Readmissions, for the purposes of determining PPRs, excludes the following circumstances:

   1. (i) The original discharge was a patient initiated discharge and was against medical advice (AMA) and the circumstances of such discharge and readmission are documented in the patient's medical record.
   2. (ii) The original discharge was for the purpose of securing treatment of a major or metastatic malignancy, multiple trauma, burns, neonatal and obstetrical admissions.
   3. (iii) The readmission was a planned readmission or one that occurred on or after 15 days following an initial admission.

   4. (iv) For readmissions occurring during the period up through March 31, 2012, the readmission involves an original discharge determined to be behavioral health related.

      (d) Methodology.

10. (1) Rate adjustments for each hospital shall be based on such hospital's 2007 Medicaid paid claims data and managed care encounter data for discharges that occurred between January 1, 2007 and December 31, 2007.
11. (2) The expected rate of readmissions shall be reduced by 24 percent for each hospital for periods prior to September 30, 2010; 38.5 percent for the period October 1, 2010 through December 31, 2010; and 33.3 percent on and after January 1, 2011.
12. (3) Excess readmission rates are calculated based on the difference between the observed rate of PPRs and the expected rate of PPRs for each hospital.

13. (4) In the event the observed rate of PPRs for a hospital is lower than the expected rate of PPRs, the excess number of readmissions shall be set at zero.

    (e) Payment calculation.

14. (1) For the excess readmissions identified in paragraph (d)(3) of this section, each hospital's projected payment rate for the 2010 rate period, as otherwise computed in accordance with this Subpart, will be used to compute the relative aggregate payments, excluding behavioral health, associated with the risk adjusted excess readmissions in each hospital.
15. (2) For each hospital, a hospital specific readmission adjustment factor shall be computed as one minus the ratio of the hospital's relative aggregate payments associated with the excess readmissions from paragraph (d)(3) of this section and the hospital's relative aggregate payments for all non-behavioral health Medicaid discharges as determined pursuant to this subdivision.
16. (3) Non-behavioral health related payments to hospitals shall be reduced by applying the hospital readmission adjustment factor from paragraph (2) of this subdivision to the applicable case payment or per-diem payment amount for all non-behavioral health related Medicaid discharges to the hospital.

(b) Definitions.

For purposes applicable to this section the following terms shall be defined as follows: