A new study from HHS' Office of the Inspector General has found that high hospital charges are driving up Medicare payments.
Virtually every U.S. hospital receives extra “outlier” payments from Medicare to offset costs for catastrophically expensive patients. Those extra payments are based on hospitals' undiscounted charges, so higher charges mean higher outlier payments.
The Nov. 14 report zeroed in on 158 hospitals whose average outlier payments were much higher than the rest. The agency found that these facilities each received an average of $6.5 million per year in extra payments, while the other hospitals averaged less than $1 million each per year.
The average outlier payment between 2008 and 2011 was $15,842. But about 6% of outlier payments exceeded $50,000. The largest single payment in that period went to a hospital that received $1.4 million for a tracheostomy patient who ended up on ventilation for more than four days.
Although only 2% of Medicare hospital bills include outlier payments, those payments totaled about $4 billion a year in extra reimbursements.
High-outlier hospitals were larger and more likely to be in urban areas and to be teaching hospitals, according to the report. While urban teaching hospitals often say they treat sicker patients, the OIG study found that their patients' average length of stay in the hospital—an indicator of severity of illness—was nearly the same as in the lower-priced hospitals for the same services.
The findings “raise concerns about why charges and estimated costs for similar patient-care cases vary substantially across hospitals,” the report concluded.
American Hospital Association spokeswoman Jennifer Schleman said “Medicare outlier payments are necessary to protect hospitals from significant financial losses resulting from patient care that is extraordinarily costly.”
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