Hospital readmission rates for heart failure (HF) are increasingly seen as a quality metric and are being used to define reimbursement rates and penalize underperforming hospitals. As disease patterns shift from single acute episodes of illness to more chronic and degenerative diseases, healthcare systems across the country are grappling with the challenge of providing quality care while simultaneously controlling both readmission rates and spending. Using HF as a prototypical example of chronic illness, this review begins by describing the historical underpinnings of readmission rates and how they have become a mainstream metric of healthcare quality. It then examines the controversial relationship between hospital quality and readmission rates. The paper examines several strategies to decrease readmission rates, including discharge planning and readmission reduction programs, as well as the relationship between readmission rates and mortality rates. The principal drivers of readmissions are discussed and the impact of new readmission-based financial policy is explored as well.