Medicare's hospital readmission penalties kick in

On Monday, Medicare began fining nearly two-thirds of hospitals that have high numbers of patients who are readmitted within 30 days of discharge for heart attacks, heart failure and pneumonia.

The readmission penalties, estimated to cost the average hospital about $125,000 per year, are part of an Affordable Care Act initiative aimed at improving quality and lowering government costs.

Some experts believe that the penalty is still low enough that hospitals will opt to pay it rather than change readmission policies.  But others believe the initiative holds opportunity for nursing homes because it encourages hospitals to partner with quality post-acute providers as a means of reducing readmissions.

"We are also spreading our wings a little and reaching outside the hospital, to the extent that we can, to make sure patients are getting the ongoing treatment they need," Nancy Foster, the American Hospital Association's vice president for quality and safety, told the Associated Press.

Currently, readmission penalties are capped at 1% of a hospital's Medicare payments for the first year, but will eventually rise to 3% under the ACA.