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Revised geographic adjustments could improve accuracy of Medicare payments, will not solve access, quality problems
Date:7/17/2012

WASHINGTON Changing the way that Medicare payments are adjusted to account for regional variations in the cost of providing care as recommended by a previous report from the Institute of Medicine would result in payment increases for some hospitals and practitioners and decreases for others, concludes the Phase II report from the IOM study. Geographic adjustments should be used to ensure the accuracy of payments, said the committee that wrote the report, but they are not optimal tools to tackle larger national policy goals such as improving access to care in medically underserved areas.

Adjustments to Medicare payments based on geography are intended to account for regional variations in wages, rents, and other costs incurred by hospitals and individual health care practitioners. 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. In its previous report, the committee recommended changes to the data sources and methods used to calculate payment adjustments to achieve greater accuracy.

Using a series of statistical simulations and analyses in the second phase of the study, the committee concluded that its recommendations, if adopted by the Medicare program, would improve the technical accuracy of payments, and these payments would increase or decrease by less than 5 percent on average for the majority of hospitals and most physicians. The committee acknowledged that seemingly small percentages could make significant differences to providers and organizations striving to provide high-value health care. The simulations showed that the committee's proposed new approach using data from the Bureau of Labor Statistics would yield generally higher relative hospital wages in rural areas than the current approach using Medicare data. The changes in how practitioner payments are calculated would result in an overall payme
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Contact: Christine Stencel
news@nas.edu
202-334-2138
National Academy of Sciences
Source:Eurekalert

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