Certain cancer hospitals get significantly higher payments from Medicare in part because it's assumed they care for sicker populations. A federal report suggests that's not generally the case.
The U.S. Government Accountability Office has recently expressed concern (PDF) that the 11 dedicated cancer centers exempt from the prospective payment system have little incentive to be cost-efficient and that the reimbursement arrangement may not be warranted because their patient populations aren't much sicker than regularly paid facilities.
If Medicare beneficiaries had received inpatient and outpatient services at nearby teaching hospitals, Medicare may have realized annual savings of nearly $500 million, according to the report.
Teaching hospitals paid under Medicare's prospective payment system receive a predetermined amount based on the service provided and are able to retain any cost savings. The 11 cancer hospitals, however, receive payments mostly based on their reported costs, and are therefore less likely to look for ways to bring costs down, the GAO said.
The 11 centers include some of the biggest names in cancer care, including Houston-based MD Anderson Cancer Center and Memorial Sloan Kettering Cancer Center in New York.
The Alliance of Dedicated Cancer Centers, a group that represents the facilities, said in a statement that it was “extremely disappointed” with the GAO report. The organization argued that the report paints a “highly distorted picture based on incomplete data and flawed analysis.”
The centers are exempt from Medicare's standard payment system because of their focus on cancer, payer mix, number of beds and use rates, according to the GAO report. The facilities are paid for inpatient services based on their reported costs, subject to an upper limit, as well as potential add-on payments. For outpatient services, Medicare pays them at service-specific rates with an upward payment adjustment based on reported costs.
In 2012, inpatient payments were, on average, 42% higher for the dedicated cancer centers than what would have been paid to a local teaching hospital to treat the same patient in the same geographic area, according to the report. Outpatient payments were 37% higher, on average.
Medicare measures a patient population's relative health status using an average risk score, which is higher for a sicker population. The 11 cancer centers had a score of 2.6 for inpatient beneficiaries in 2012, compared with 2.4 at regularly paid teaching hospitals with comprehensive cancer centers and 2.5 at teaching hospitals without cancer centers, the GAO found.
Outpatient beneficiaries had a risk score of 2.2 at the cancer centers, compared with 1.9 and 2.0 at the teaching hospitals with and without comprehensive cancer centers, respectively.
The Alliance of Dedicated Cancer Centers notes that the GAO fails to consider treatment outcomes as a reasoning for the reimbursement structure. The likelihood of patients surviving their cancer after five years at one of their member facilities is 17% higher than at other hospitals, according to Medicare data from 2006 to 2011 cited by the group (PDF).
“Any changes to the way the Dedicated Cancer Centers provide care to Medicare patients should be very carefully considered,” the Alliance said. “Without the protections in place today, ADCC members would face a devastating financial shortfall that could result in unintended, catastrophic consequences for our patients and the war on cancer.”
The GAO is recommending that Congress require Medicare to pay the 11 cancer centers as it pays other teaching hospitals, or provide HHS with the authority to otherwise modify how Medicare pays them.
“Until Medicare pays PCHs in a way that encourages efficiency, instead of paying largely on the basis of their reported costs, Medicare remains at risk for overspending,” the report said.
