Medicare will apply these readmissions penalties to hospital reimbursements from Oct. 1, 2017 through Sept. 30, 2018, which is the 2018 federal fiscal year (FY2018). Maryland hospitals were not penalized because the state has federal permission to set its own Medicare payment rules. Also exempt are certain cancer hospitals, critical access hospitals and hospitals dedicated to psychiatry, rehabilitation, long-term care and veterans. Medicare also did not levy penalties against hospitals that had too few cases to be fairly evaluated.