Hospital readmissions can be bad news for patients, but they can also be bad news for a hospital’s bottom line. Readmissions cost $41.3 billion overall, a majority of which—about $26 billion annually—is paid by Medicare. Moreover, as much as $17 billion of Medicare-paid readmissions are considered to be avoidable.

As value-based care models continue to take over the healthcare landscape, it’s no wonder that CMS has attempted to incentivize the reduction of avoidable readmissions. As part of the Affordable Care Act in 2012, CMS implemented the Readmissions Reduction Program (HRRP), which financially penalizes IPPS hospitals with “excess readmissions”, cases where avoidable 30-day readmission rates for a specific list of conditions exceed the national average.

And that national average has crept lower, overall. Between 2010 and 2016—according to CMS data—every state except Vermont reduced its avoidable hospital readmission rates, to the tune of about 565,000 total avoided readmissions for Medicare beneficiaries. This is likely in part due to HRRP incentives. Despite this improvement, however, Medicare will penalize about 80 percent of the hospitals CMS evaluated for fiscal year 2018, based on their readmission rates between 2013 and 2016. This translates to roughly $564 million in withheld payments. Most of the hospitals docked this year faced penalties in 2017 as well.

So how can hospitals reduce their readmission rates and avoid unnecessary financial penalties? Here are a few points to consider when deciding on a strategy:

 Identify patients at risk.

The Agency for Healthcare Research and Quality (AHRQ) lists the top reasons for Medicare and Medicaid readmissions, but often the causes of readmission are social, rather than medical, in nature. Therefore, in addition to understanding the most common medical causes for readmission within a population, hospitals should develop screening protocols to identify patients at risk for readmissions due to social determinants. Deloitte has found that while about 88 percent of hospitals screen patients for social needs, only 62 percent screen systematically or consistently.

 Optimize care coordination.

Health Affairs reports that inefficient care transition management, along with other deficiencies in care coordination, accounted for between $25 and $45 billion in wasteful spending in 2011. Lack of communication and lack of accountability are the likeliest culprits, and so to address this issue hospitals must find ways to coordinate care across multiple providers.

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 Educate patients and caregivers.

When patients are given inadequate or even contradictory information about their care, they can become confused about which steps to take after a hospital stay. According to Patient Engagement HIT, patients who were not engaged in their own care initially were 34 percent more likely to be readmitted, while patients who did not receive written discharge instructions were 24 percent more likely.

Hospitals should also involve caregivers in discharge planning. According to research from the University of Pittsburgh Medical Center, family caregiver engagement cuts hospital readmissions by as much as a quarter.

 Invest in the right technology.

The right analytics software can facilitate tracking metrics, reporting, and even improvement. It can help identify at-risk patients, optimize care coordination, and provide information to patients and caregivers. While the initial cost and training involved in implementing new technology can be a deterrent, effective implementation can ultimately mean savings, and this option is worth serious consideration for hospitals that want to maximize reimbursement.