Medicare will impose more than $500 million in penalties in FY 2017 on hospitals that readmit too many Medicare patients within 30 days of their discharge from the hospital.

The penalties, part of Medicare’s hospital readmissions reduction program, represent a 20 percent increase over the penalties the program levied in FY 2016.

Under the program, most (but not all) hospitals are evaluated on their performance with patients with six medical conditions: heart attacks, heart failure, chronic lung disease, hip and knee replacement, and the need for coronary bypass surgery. The maximum penalty is three percent of hospitals’ Medicare payments and the average penalty in FY 2017 will be 0.73 percent – up from 0.61 percent in FY 2016.

The program is widely credited with driving a national reduction in the number of Medicare patients readmitted to the hospital within 30 days of discharge, although as the program’s FY 2017 penalties suggest, reducing those readmissions is proving a considerable challenge for some hospitals.

Ever since the program’s introduction the National Association of Urban Hospitals has called on the Centers for Medicare & Medicaid Services to introduce a risk adjustment component to the program. NAUH maintains that because of the nature of the communities and patients they serve, private safety-net hospitals care for patients who are more challenging to treat and more likely to lack the kinds of financial, social, and family supports needed to recover from illnesses and injuries without requiring additional hospitalization.

Learn more about how the readmissions reduction program works and how it will treating hospitals in FY 2017 in this Kaiser Health News report.