I wouldn’t blame you if you were taken aback by the statistics seen earlier this month regarding hospital readmissions. As data from the Centers for Medicare & Medicaid Services (CMS) indicated—and as subsequent analysis from Kaiser Health News revealed—Medicare will levy $227 million in penalties against hospitals in every state but one for the second round of the government’s campaign to reduce the number of patients readmitted within 30 days.

Medicare identified 2,225 hospitals that will have payments reduced for a year starting on Oct. 1. Eighteen hospitals will lose 2 percent, the maximum possible and double the current top penalty. Another 154 will lose 1 percent or more of every payment for a patient stay.

And in the future, the feds won’t be making anything easier. Under the Affordable Care Act (ACA), the maximum penalty will increase to 3 percent by 2015 and will be expanded to include readmissions for other medical conditions—not just the three conditions that are included currently: heart attack, heart failure and pneumonia.

And those reimbursement cuts are separate from the payment cuts that will affect hospitals with unacceptable quality under the value-based purchasing program and the healthcare-acquired conditions reduction program.

This all sounds like incredibly troubling and concerning news for the healthcare industry, when hospitals are supposed to be lowering readmissions in an effort to improve clinician accountability and patient safety all while cutting costs, right?

Kind of.

I recently interviewed Mike Gallagher, M.D., chief medical officer (CMO) at the Plantation, Fla.-based Health Revenue Assurance Holdings, a provider of healthcare solutions and consulting. Gallagher spoke about a few myths people have about readmissions that tend to irk him. Number one, he says, while most of the attention on the subject centers around the CMS penalties (he HATES to call them fines, which they are not), people are often confused about how those readmissions rates are calculated.

As Gallagher explains, the readmissions rates are calculated off information submitted to CMS, usually in the form of claims. “A lot of medical groups, especially when working with the inpatient data, don’t necessarily track the claims data. The medical groups are the physicians and other professionals who provide care, and they’re more concerned with information used for medical decision-making and how to treat their patients, and rightly so,” he says. “But all of that wealth of information doesn’t get represented in the claim. The medical groups want to know more about why these patients come back than what they see in these claims. You miss a lot of information that won’t show up in the claims per se.”

As such, it would not be hard to see why the same perspectives on readmissions rates are not always shared by payers and providers. And it brings up another question, too—should readmissions rates be considered a main indicator of the quality of a hospital?

Gallagher says no. “The readmissions reduction program is not about hospital quality, it’s about paying for re-work. But the rates get published and that gets picked up by a lot of media outlets. And people start thinking, ‘Oh my god, look at all of these readmissions, I can’t go to that hospital.’ But it’s not about a hospital’s quality. You can give amazing healthcare and discharge the person, and if that person lives in an area that is socially and geographically isolated, you will have a hard time providing those services. You also might have folks not proficient in English, or maybe they don’t have a home. Those people have a hard time participating in their home healthcare, and that will make a hospital look bad.”

Additionally, as published in the June issue of Health Affairs, researchers compared quartile rankings of hospitals based on readmissions rates in 2009 and 2011 to see whether hospitals maintained their relative performance or whether shifts occurred that suggested either changes in quality or random variation. More simply put, would regression to the mean account for a portion of the changes in hospital performance? The results said yes, as rankings fluctuated, and readmissions rates for lower-performing hospitals in 2009 tended to improve by 2011, while readmissions rates for higher-performing hospitals tended to worsen. The authors suggested that other measures should be considered in addition to readmissions rates when comparing hospital quality, and that it is important to take regression to the mean into account by adjusting accordingly. Basically, you cannot rely heavily on readmissions rates alone as an indicator of hospital quality.

Another aspect of readmissions that is often overlooked is that not every readmission should be looked at as a bad thing. That’s right—sometimes, going back to the hospital is good! Beth Israel Deaconess Medical Center in Boston and Olympia Medical Center in Los Angeles—according to a recent NPR article—are two medical groups that had unusually high readmissions rates for heart attacks but lower-than-average mortality rates. If a patient who had a heart attack leaves the hospital and within a day, has severe chest pain again, they are going to (and should) go back to the ER. This is a good thing, but it will count “negatively” against a hospital’s readmissions.

Medicare plans to take mortality rates into account when reimbursing hospitals starting in Oct. 2013, but that hasn’t been the case to date. Gallagher says it’s not about getting the readmission number down to zero—that wouldn’t be a good thing he claims. Instead, we need to figure out what the right rate is. Sometimes you will discharge people and expect them to come back—and in certain cases, that’s okay, he says.

What’s more, the efforts that patient care organizations have been making to lower readmissions rates have been inspiring as well. I recently wrote about a few of these initiatives, including one at the Mountain View, Calif.-based El Camino Hospital, which went outside its walls to utilize skilled nursing facilities (SNF) to help with post-discharge care. And the efforts paid off; in the first three months of 2013, the hospital saw a 4.7 percent seven-day readmissions rate among the 584 patients discharged to SNFs. By contrast, over the same three months in 2012, the hospital’s readmissions rate had been 6.2 percent among 526 patients discharged to SNFs.

El Camino is just one example of many healthcare systems doing fine work in the readmissions reduction spectrum. Most CMOs, according to Gallagher, make reducing readmissions a top 3-5 goal each year, while CFOs will make it a top-10 goal. So while there should be cause for concern when it comes to hospitals reducing readmissions, let’s not go overboard just yet. Hospitals are being knocked for things that are sometimes out of their control, and that’s unfair to them. I think the efforts that health systems are making coupled with the stricter (and perhaps fairer) penalties that CMS will enact going forward will make readmissions less of a major issue in the years to come.