Hospitals’ Huge Bills: Is Medicare Caving In?
Before the Labor Day long weekend, the Centers for Medicare & Medicaid Services (CMS) quietly disclosed a deal it is offering to America’s hospitals, many of which are engaged in a long-running dispute over hospital charges. Apparently responding to political pressure, CMS is offering hospitals which accept the deal 68 cents on the dollar to close disputed claims.
At issue is hospitals charging higher prices for inpatient procedures in cases where CMS (and its auditors) assert lower prices for outpatient procedures are appropriate. There is a growing caseload of these disputed claims, jamming the administrative courts, giving hospitals cash flow problems, and motivating them to lobby against the audits that identified the alleged overbilling.
Hospitals should be paid for their services, but they are also very skilled at arbitraging the outpatient and inpatient fee schedules, especially when admitting from their emergency departments. This is one reason why we at this blog are concerned about their rolling up physicians’ practices.
Auditing and administrative lawsuits cannot get to the root of the problem: Medicare’s payments to hospitals are still based on a cost-plus doctrine, which allows hospitals to charge more than outpatient facilities that are often more efficient. Some reformers have proposed “site-neutral payments,” which still leave the government in charge of determining prices, but at least moves further away from a cost-plus pricing approach.
It is concerning that hospitals’ lobbying clout is forcing CMS to throw out an arbitrary figure to make the problem go away, when what is needed is more attention on the problem of hospital charges.
We’ve discussed reference pricing before, where patients themselves are encouraged to seek out lower-cost hospitals. Enrollees who pick the higher-priced hospitals must pay the difference between hospital charges and the (lower) reference price.
Rather than arbitrary offer to pay two-thirds of disputed charges, why not restructure Medicare where it encourages competition? If a senior doesn’t mind paying for inpatient charges when outpatient facilities would have been sufficient, let them pay the difference. After a few thousand angry seniors camp out in the business office managers’ offices waving their canes in the managers’ face, the hospitals would probably work to find a solution.
John–Doesn’t it bother you a little that Medicare unilaterally decides that outpatient charges are more appropriate AFTER the inpatient servicer has already been given and billed? That’s like buying a meal for someone, then coming back later and saying, they could have had a meal at a food truck.
This is what is so disgusting about Medicare; they are lazy and incompetent,. They could have published a list of the procedures for which they would only pay outpatient rates; but they wait until the service is given, then whine about it. Hospital rates are too high. But not all outpatient services are at a level of competence that would make them an adequate substitute for an inpatient experience. For one thing, those that re physically separate from the hospital may lack the back-up for bad cases, or have the right anesthesia support. CMS should also contract with healthcare systems after asking for proposals by program, service and price. Negotiate, then pay the damn bill. Medicare has been in business for 48 years, and they can’t figure out how to do this?
I wish they would take responsibility for high prices that they help to be high by all the regulation, the cost-shifting and the legal messes they cause. What the hell?
Luv,
Wanda J.
By the way–all Devon can think to say is how to get several thousand seniors mad at their hospitals? This is not a funny situation, it is a chronic boil on the face of a Federal/private partnership.
Wanda, you remind me of my wife, way too nice. You should have said, “This is what is so disgusting about Medicare; they are lazy, incompetent and stupid.”
Some scientists claim that hydrogen, because it is so plentiful, is the basic building block of the universe. I dispute that. I say there is more stupidity than hydrogen, and that is the basic building block of the universe.
Frank Zappa
Read more at http://www.brainyquote.com/quotes/authors/f/frank_zappa.html#MwfjO3fW0lSvpCDP.99
There is more stupidity than hydrogen in the universe, and it has a longer shelf life.
Frank Zappa
“Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.”
― Albert Einstein
It bothers me a heck of a lot. However, that is a characteristic of insurance. You will have noted, I hope, that I gave a positive mention of site-neutral payments, but did not clearly endorse such a reform without qualification.
Good background from Wanda…..but does CMS really have the power to declare and impose a site-neutral fee schedule? I think that Congress would have to be involved, and the hospital lobbyists might rule the roost.
I do not remember the exact details, but Congress thwarted an attempt by CMS to control the reimbursements for scooters and other durable medical equipment.
That was maybe a $1 billion issue at most, and CMS in the end could do nothing.
A truly site-neutral fee schedule would cost hospitals at least $100 billion. Many hospitals have used bloated outpatient fees to survive a decline in admissions.
Devonand others:
I am curious if you know of any specific plans that have reference pricing?
Does that mean, in essence there are no networks, one can see any provider they wish.
The only stipulation is that the price is capped.
If the proper documentation is provided through extensive research, this would seem to pass muster.
Has any one contested these plans, legally?
Does anyone know of any plans that are providing 125%, or some percentage, of Medicare prices?
Any time one does not have to negotiate every price for every procedure with every provider, there is a huge cost savings.
Don Levit
This blog has discussed Anthem’s experience in California with CALPERs (an ASO contract). We are currently looking into regulatory barriers to more widespread adoption of reference pricing.