Lowering Critical Access Hospitals’ Payment Rates Could Save Billions
Medicare could have saved billions of dollars over six years if critical access hospitals were not reimbursed at a higher rate for rehabilitation services than other facilities, according to an HHS Office of Inspector General report released Monday, the AP/U-T San Diego reports.
A 1997 law designated some facilities as "critical access hospitals," with the goal of helping smaller facilities in rural areas survive (Sedensky, AP/U-T San Diego, 3/8). By definition, CAHs must have 25 or fewer beds and must be located at least 35 miles from another facility in communities that would otherwise lack adequate access to health care services. These facilities receive Medicare reimbursements at a rate of 101% of what it costs for them to provide services, while traditional hospitals are reimbursed at about 93% of costs for beneficiaries (California Healthline, 8/16/13). In addition, CAHs receive state grants and funding.
Most providers are not allowed to bill Medicare in-patient rates for beneficiaries' rehabilitative services, and instead would have beneficiaries receive such services at nursing homes or other facilities. However, CAHs are authorized to bill Medicare at full in-patient rates for rehabilitation services, rather than at the lower rate they would receive if such services were provided by other facilities. Such beneficiaries, who can receive rehabilitation services in the same beds as patients receiving inpatient services, are known as "swing-bed" patients.
Report Details, Findings
For the report, researchers analyzed a sample of swing-bed claims submitted by 1,200 CAHs to Medicare between 2005 and 2010.
The report found that 90% of the beneficiaries could have been relocated to a skilled-nursing facility located within 35 miles of the hospital at a far lower cost to Medicare. Researchers found that the average Medicare reimbursement to CAHs for swing-bed beneficiaries in 2010 was $1,261 per day, compared with an average of $273 a day if a patient had been moved to another facility.
According to the report, Medicare reimbursed for 914,000 days of swing-bed beneficiaries' rehabilitation care in 2010, compared with 789,000 days in 2005. Researchers found that CAHs view patients receiving such services as helpful to the facilities' bottom lines. The researchers wrote that the increased payments received by CAHs "support a hospital's fixed costs and offset losses from other lines of business" (AP/U-T San Diego, 3/8).
OIG found that Medicare could have saved $4.1 billion between 2005 and 2010 if it reimbursed CAHs' swing-bed services at Medicare's skilled nursing facility rates.
OIG recommended in the report that CMS advocate for legislation to adjust CAHs' reimbursement rates for swing-bed beneficiaries to the lower skilled nursing facility payment rates (HHS OIG report, March 2015).
CMS Administrator Marilyn Tavenner in a written response agreed that CAHs had increased claims for swing-bed beneficiaries. However, she wrote that the report's sample of CAHs might not have been representative. In addition, she wrote that the report inflated its estimated savings by not factoring in the cost of transporting patients from CAHs.
She also wrote that the report did "not take into account the burden on patients of being treated farther from home and family," as alternate facilities 35 miles from CAHs could be much farther than 35 miles away from beneficiaries' families.
National Rural Health Association CEO Alan Morgan said dozens of rural hospitals had closed down over the last five years and that nearly 300 other rural hospitals are on the brink of closure. He said that reducing reimbursements would lead to more closures. He said, "Medicare could save money in many ways. That's not the question. The question is what is right for our rural patients and their access to high-quality services designed to care for the frail, elderly patients in their home communities" (AP U-T San Diego, 3/8).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.