WASHINGTON Geographic adjustments to Medicare payments are intended to accurately and equitably cover regional variations in wages, rents, and other costs incurred by hospitals and individual health care practitioners, but almost 40 percent of hospitals have been granted exceptions to how their adjustments are calculated, finds a new report from the Institute of Medicine. The rate of exceptions strongly suggests that the mechanisms underlying the adjustments are inadequate, noted the committee that wrote the report.
The rationale for fine-tuning Medicare payments based on geographic variations in expenses beyond providers' control is sound and should be continued, the committee concluded. However, several fundamental changes to the data sources and methods the program uses to calculate the adjustments are needed to increase the accuracy of the payments.
"The Medicare program needs more precise and objective tools and methods to assure the nation that the billions being spent are appropriately and fairly disbursed," said committee chair Frank Sloan, J. Alexander McMahon Professor of Health Policy and Management and professor of economics, Duke University, Durham, N.C. "As the criticism we heard from a range of health care providers indicates, there is significant skepticism about the fairness and accuracy of how adjustments are currently being determined. This report's recommendations will increase the likelihood that the geographic adjustments reflect reasonably accurate measures of regional differences in expenses."
Medicare payments to hospitals and health professionals working in private practice topped $500 billion in 2010, according to Congressional Budget Office estimates. Federal law requires geographic adjustments to be budget neutral, meaning any increase in the amount paid to one hospital or practitioner must be offset by a decrease to others.
Salaries and benefits make up one of the largest costs of providi
|Contact: Christine Stencel|
National Academy of Sciences