Medicare Overpaying Providers More Than $1 Billion in Reimbursements, HHS Inspector General Says

Medicare could reduce its spending by $1.1 billion per year by adjusting a fee schedule that reimburses some providers more than other providers for performing the same service, according to a report by HHS Inspector General Janet Rehnquist, the Washington Post reports. The report examined how much Medicare pays ambulatory surgical centers and hospital outpatient departments for the same outpatient services. The report found that for almost 66% of outpatient services examined, hospitals received higher reimbursements than the centers, and that cutting the hospital fees to match the centers' fees would save $1 billion per year. In cases where the centers had higher reimbursement rates, cutting the rates to match hospitals' rates would save Medicare $100 million per year, according to Rehnquist. "In the absence of a compelling reason for a payment differential, the amount Medicare pays for a procedure should be based on the service and not the setting," Rehnquist said, adding that there should be "immediate action to correct this imbalance by establishing greater parity in the payment rates." HHS officials said the rates differ for hospitals and ambulatory centers because they come from different formulas in different sections of the law that governs Medicare. Don May, vice president for policy at the American Hospital Association, said that Medicare pays hospitals more because hospitals "have more poor patients, they are open all the time and they are seeing sicker patients." He added that nearly every hospital "is already losing money providing care to Medicare patients," saying that further reducing reimbursement rates "will only cause access problems, particularly in rural areas and inner cities." Changing reimbursement rates would require legislative action, the Post reports (Walsh, Washington Post, 2/7). The report is available online. Note: You must have Adobe Acrobat Reader to view the report.