Healthcare Business News
Richard Burr, Republican Senator from North Carolina

Senators seek overhaul of hospital payment system

By Rich Daly
Posted: May 16, 2013 - 7:00 pm ET

When it comes to Medicare hospital payment systems, the exceptions are the rule.

Congress' nonpartisan investigative arm reported Thursday that 91% of hospitals paid by Medicare receive some dispensation or add-on to the program's standard payment system.

The Inpatient Prospective Payment System was designed to maximize “cost-control, efficiency and access” when it was launched 30 years ago, according to the Government Accountability Office report. But Congress has piled an accumulating number of exemptions and carve-outs for various types of hospitals.

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The agency's other findings include that 63% of hospitals qualify for at least one of four types of payment increases; 28% of hospitals receive an exemption from IPPS through the Critical Access Hospital program; and Congress has enacted 15 changes to boost payments for various groups of hospitals.

For nearly all hospitals, those tweaks have added up to payments that exceed Medicare's standard rates. But some hospitals have benefited more than others. For instance, the GAO found 70 hospitals received four types of additional payments on top of the standard Medicare reimbursements.

The senators who requested the report said the findings support the previous conclusions of the Institute of Medicine and the Medicare Payment Advisory Commission that numerous modifications to the payment system have undermined the integrity of the IPPS.

The widespread carve-outs indicate that an overhaul of the hospital payment system is needed, they said.

“It's another indicator of the need to strengthen and improve Medicare to better serve seniors and taxpayers,” Sen. Richard Burr (R-N.C.) said in a news release.

The trade group for rural hospitals—among the biggest beneficiaries of the modifications—countered that the IPPS system was designed primarily for high-volume providers. “But in low-volume environments, this is not an appropriate mechanism to ensure that you are able to sustain organizations to carry out their missions,” Brock Slabach, a senior vice president at the National Rural Health Association, said in an interview.

The changes to IPPS were needed after nearly 400 hospitals—many of them rural facilities—closed between 1983, when Congress launched the IPPS system, and 1995, Slabach said. “These are corrections to a poorly designed system in the first place.”

Follow Rich Daly on Twitter: @MHrdaly

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