Project objectives

‘Quicker and sicker’ has persisted as a perception of activity-based funding, causing funders to implement strategies to maintain quality of care under these systems. HPA undertook this systematic review of the evidence to inform decisions about using financial levers to reduce preventable hospital readmissions.

The Evidence Check aimed to address the following questions:

  • What effect have programs that use financial levers to reduce preventable hospital readmissions had on hospital readmission rates?
  • What effect have programs that use financial levers to reduce preventable hospital readmissions had on mortality rates?

What other unintended consequences have programs had that use financial levers to reduce preventable hospital readmissions?

Australian Commission for Safety and Quality in Healthcare (brokered by the Sax Institute)

Our approach

We used the PICO (Population, Intervention, Comparison and Outcome) framework to define the scope of the review. We searched published literature using terms that captured the concepts relevant to the review questions, including types of financial levers and readmissions.

The scope of the review included programs in the US, England, Germany and Denmark, published in English between 1996 and 2019. We also conducted a hand search and search of grey literature. We identified 1,290 papers.

Two reviewers independently screened the abstracts initially and then the full text of papers selected for further review. Sixty-one articles met the review criteria. Data on the studies and the programs in each of the four countries were abstracted. We assessed risk of bias of the included studies using a modified version of the Risk Of Bias In Non-randomized Studies of Interventions (ROBINS-I).

We identified four programs/initiatives that met the criteria of applying financial incentives to reduce preventable hospital readmissions. Two were being used in the U.S. (the Medicare Hospital Readmissions Reduction Program and the Medicare Bundled Payments for Care Improvement), one in the UK (the National Health Services non-payment for emergency readmission scheme) and one in Germany (German Diagnosis Related Groups episode definition rules).


We found that financial incentives can have a beneficial effect on the level of readmissions, but that it is unclear whether they lead to significant continuing declines beyond the initial introduction. There may also be unintended consequences. Careful attention needs to be given to the design of programs, including consideration of what other mechanisms and initiatives support successful implementation. There is little evidence from countries other than the US, and the experience there highlights the difficulty in ascribing causal relationships to financial levers in a complex health system, especially where other changes are happening concurrently.


While there is limited evidence of the cost-effectiveness of different approaches to reducing preventable readmissions, policymakers should have some regard to the potential costs and benefits of the alternatives.


The findings were used by the Commission in its work with the Independent Hospital Pricing Authority to integrate safety and quality into the pricing and funding of Australian public hospitals.

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