IOM Report Says Flawed Medicare Data Lead to Inaccurate Payments
Medicare payment adjustments and flawed data often lead to inaccurate reimbursements for hospitals and doctors in various regions of the U.S., according to an Institute of Medicine report released on Wednesday, MedPage Today reports (Walker, MedPage Today, 6/1).
CMS adjusts Medicare payments for providers based on regional variations in wages, rents and other costs (Pear, New York Times, 6/1). However, federal law mandates that if payments increase for providers in one area, they must be offset by lowered payments to providers in another area (MedPage Today, 6/1).
The system of paying physicians has "fundamental conceptual problems" and the hospital payment method is so flawed that nearly 40% of care providers have been reclassified into higher-paying areas, according to the report.
According to the Times, physicians and hospitals being reclassified into higher reimbursement categories likely means payments were lowered to providers elsewhere (New York Times, 6/1). The report states, "The rate of exceptions strongly suggests that the mechanisms underlying the adjustments are inadequate" (MedPage Today, 6/1).
Impetus for Report
The White House commissioned the study in March 2010 during the health reform debate as a way to secure votes from lawmakers from Iowa, Minnesota, Wisconsin and other states. According to the lawmakers, providers in many regions of their states are underpaid, which makes it difficult to recruit physicians, nurses, specialists and other practitioners.
The federal health reform law mandates that by the end of this year the HHS secretary submit to Congress a plan to revise the system in which Medicare adjusts payments to factor regional differences in hospital wages.
The report criticizes the reimbursement system for recognizing 441 hospital labor markets and 89 physician payment zones. The report suggests that Medicare instead should recognize a single set of 441 payment areas for physicians and hospitals.
According to the report, such a change would separate higher-cost areas from lower-cost areas. It also notes that such a strategy mostly would increase payments to physicians in metropolitan areas, while payments to physicians in some rural areas generally would decrease (New York Times, 6/1).
In addition, the report recommends that Medicare officials:
- Use data on salary and benefits from the Bureau of Labor Statistics to make wage adjustments for hospitals and private-practice health workers;
- Use wage data about various types of health care workers to determine median wages;
- Consider the same regional boundaries for hospitals and private practices in the same area; and
- Base rent data on commercial rent information rather than on median subsidized rents in the area.
However, the report notes that "fine-tuning Medicare payments based on geographic variations in expenses beyond providers' control" is a good idea and should not be discontinued.
Frank Sloan, a professor of economics at Duke University, agreed with the findings, saying that "the Medicare program needs more precise and objective tools and methods to assure the nation that the billions being spent are appropriately and fairly disbursed" (MedPage Today, 6/1).
However, the American Hospital Association cited concerns with the study's recommendation to use BLS data to adjust wages.
Don May, AHA's vice president for policy, said, "Things like pension, benefit and overtime costs are not included in BLS data, but can make a huge difference in hospitals' wage costs" (Yukhananov, Reuters, 6/1).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.