IOM Proposals Would Cut Medicare Hospital Payments by 3% to 4%
California hospitals would lose an average of 3% to 4%Â in Medicare reimbursements under recommendations by the Institute of Medicine, according to a study of the possible effects of the proposals, the Redding Record Searchlight reports.
The article was produced by the California HealthCare Foundation's Center for Health Reporting. The Center is supported by a grant from CHCF, which publishes California Healthline (Westphal, Redding Record Searchlight, 8/14).
In 2010, HHS commissioned IOM to conduct a two-part study to recommend changes to Medicare reimbursements that would correct inaccuracies and inequities in geographic adjustments.
The first part of the study recommended several changes, such as:
- Using the same geographic and payment areas for hospitals and health care providers;
- Calculating reimbursements for clinical and administrative hospital workers using different data sets than those used to calculate payments for staffers at office-based health care providers; and
- Expanding occupation types used to make geographic adjustments.
The second part of the study applied the recommendations to determine their possible effects on Medicare reimbursements to hospitals and physicians (IOM report brief, July 2012).
Key Findings of Second Part of Study
According to the second part of the study, IOM's proposals would reduce hospital reimbursements in 26 of 28 metropolitan areas in California.
In addition, physician reimbursements would decline in 36 of 58 California counties, nearly all of which are rural.
The study found that doctor reimbursements in rural counties such as Kings and Merced would be cut significantly -- by 6.4% and 5.3%, respectively -- while physicians in Sacramento County would see a 2.1% increase under the recommendations.
Advocates say that the recommendations seek to remove a penalty imposed on certain counties designated as being rural -- such as San Diego and Santa Cruz --Â which receive lower physician reimbursements than warranted in the region.
Physician reimbursements would increase by 3% in San Diego County and by 9% in Santa Cruz County under the recommendations, the study found (Redding Record Searchlight, 8/14).
According to IOM, the majority of hospital and physician reimbursements would change by less than 5% on average (IOM release, 7/17).
According to the Record Searchlight, the study highlights the ways in which the Medicare payment system might unfairly penalize certain regions of California.
For example, hospital reimbursements in Santa Rosa would decrease by 14.5% under the recommendations, while reimbursements in Visalia would increase by 10%.
The findings imply that Santa Rosa hospitals currently are receiving significant overpayments while Visalia is not drawing as much in reimbursements, according to the Record Searchlight.
Anne McLeod, senior vice president of the California Hospital Association, said that "another 5% reduction" in Medicare reimbursements "would just be devastating," considering the billions of reimbursement cuts that hospitals in the state already have sustained.
The group also disagreed with IOM's methodology for developing the proposals, which used Bureau of Labor Statistics wage data for various geographic areas. In California, Medicare reimbursements currently are based on actual wages paid to hospital workers and account for unionized hospital staffers and a state law mandating minimum nurse staffing levels.
CHA also suggested that the recommendations likely will not be adopted by lawmakers. Jan Emerson-Shea -- CHA spokesperson -- said any adjustments to Medicare reimbursements likely will be the result of deficit-reduction strategies developed by Congress.
The California Medical Association said it supports IOM's recommendations on physician reimbursements.Elizabeth McNeil -- vice president of federal relations for CMA -- said, "Whatâs most important is [that] Medicare pay doctors based on actual costs," adding, "There hasnât been a full update of the formula since 1966 â¦ This is overdue" (Redding Record Searchlight, 8/14). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.