What makes critical-access hospitals unique is how they receive Medicare reimbursement. Medicare pays most acute-care hospitals under a prospective payment system, which has predetermined rates for every service. Usually at other hospitals, these rates are below what it costs the hospital to provide the service. But critical-access hospitals receive enhanced, cost-based reimbursements in large part so they stay open for their communities. Medicare pays them 101% of allowable costs for services.
When it comes to cost-sharing for outpatient services, the formula is also different between rural and non-rural patients. Medicare patients who receive outpatient care at general acute-care hospitals pay 22% of the hospital's prospective payment rates. But at critical-access hospitals, patients are obligated to pay 20% based on the hospital's higher charges.
The charges, more or less, are the hospital's original prices before they are negotiated down with Medicare and private insurers. And the Medicare Payment Advisory Commission found in 2011 that the average charges for outpatient services at critical-access hospitals were more than double the average costs.
That's why patients in critical-access hospitals paid almost $33 on average for an electrocardiogram, compared with $5.35 for patients at other hospitals, according to the OIG's report. Patients who received IV therapy to rehydrate in rural hospitals had to pay an $18 coinsurance, compared with $5 elsewhere.
However, not all rural patients pay the full coinsurance amounts, Gale said. Many Medicare patients who have supplemental insurance, called Medigap plans, don't directly pay the full amount. Additionally, patients who are dually eligible for Medicaid may also have some of the cost-sharing covered.
The OIG recommended several proposals to rectify the coinsurance discrepancy. It asked the CMS to petition Congress to change the law so Medicare can calculate coinsurance for outpatient services using one standardized method.
Also tucked inside the OIG's recommendations was a reference to another proposal from last year, which would overhaul the critical-access hospital system. Last summer, the OIG proposed decertifying critical-access hospitals that didn't meet location requirements, a move that would affect about two-thirds of facilities.
Rural health advocates have blasted last year's proposal, arguing that it would inevitably lead to hospital closures since rural organizations already work with thin margins. And some believe decertifying hospitals would not help deal with the coinsurance issue.
“This problem was created by Congress and Medicare and can be fixed by them with ease,” Brock Slabach, a vice president at the National Rural Health Association, wrote in a blog post Wednesday. “As the OIG report documents the problem, it's time to fix this inequity.”
“Can (the system) be improved? I definitely think it can be improved,” said Tim Putnam, CEO of Margaret Mary Health, a critical-access hospital in Batesville, Ind. “Should we wreck the system and start it over? I don't see how it would benefit the hospitals or the patients they serve.”
CMS Administrator Marilyn Tavenner responded to the OIG's report, saying the agency “looks forward to working with OIG on this and other issues in the future.” But she did not say what steps the CMS would take.
Follow Bob Herman on Twitter: @MHbherman
