The Centers for Medicare and Medicaid Services said it would review its 4-year-old outlier policy and extend its investigation of excessive outlier payments, which began with Tenet Healthcare Corp., Santa Barbara, Calif., to all hospitals receiving a large portion of their Medicare payments from outlier cases. Hospitals with "irregular" payment trends will be referred to the CMS Program Integrity Unit for further investigation and possibly to HHS' inspector general's office, according to a written statement by the CMS. The agency did not specify what level of payments would trigger review. "We will carefully scrutinize any billing trends or other indications of inappropriate reimbursement," CMS Administrator Thomas Scully said in the statement. "Although the fiscal intermediary reviews will be triggered by questionable outlier payments, all operations of the targeted hospitals will be thoroughly scrutinized for any other improper conduct." Outlier payments compensate hospitals for cases in which costs significantly exceed the DRG rate. The 2003 outlier threshold -- the minimum a hospital must lose per case to receive payments -- is $33,560, up from $21,025 this year.
Meanwhile, Tenet, which started the review, said it is renegotiating contracts with health insurers to reduce its use of stop-loss payments tied to gross charges and increase its reliance on negotiated per diem rates. It also said it would freeze its hospitals' gross charges for an undetermined length of time. With the announcement yesterday, Tenet lowered its earnings guidance for fiscal 2003 to $2.38 to $2.78 per share, compared with a previous projection of at least $2.93 per share, and set its 2004 guidance at $2 per share. -- by Jeff Tieman and Laura B. Benko