Hospitals “Turbocharge” Medicare Claims
Today’s Consumer Price Index release shows a big jump in prices for hospital services. The Wall Street Journal has an exemplary piece of investigative journalism discussing one way hospitals gouge Medicare:
A Wall Street Journal analysis of Medicare claims data and financial filings from medical facilities shows that many hospitals increased prices faster than costs rose, affecting outlier payments. The Journal identified $2.6 billion in overpayments Medicare made to general hospitals between 2010 and 2013 because of overestimates of hospitals’ costs—about one-sixth of outlier payments in the analysis.
At Christ Hospital, more than 40% of outlier payments between July 2012, when the hospital was acquired by an investor group during bankruptcy proceedings, and the end of 2013 were due solely to an increase in prices, the Journal analysis shows.
The Medicare agency took steps in 2003 to deter hospitals from raising prices to increase outlier payments, sometimes referred to as “turbocharging.”
(Christopher Weaver, Anna Wilde Mathews, & Tom McGinty, “Medicare Pays as Hospital Prices Rise,” Wall Street Journal, April 15, 2015)
Well, that’s 12 years ago, and it obviously hasn’t worked. The only way to get hospitals to quite manipulating chargemaster prices is to get the government out of fixing hospital charges.
So much for Affordable Care.
John you have some confusing language here.
a. Manipulating the fee schedule to get outlier reimbursements has nothing to do with prices. It is all about getting exceptions.
b. Did I see a number of $2.6 billion over 4 years? That is$500 million a year.
Absolute peanuts in comparison to total Medicare Part A spending.
c. You say that the govt should stop fixing hospital charges. OK but why? Hospitals will then just be like the firm that makes Sovaldi, charging all that a flimsy market will beat. This is not a solution.
Thank you very much. $2.6 billion may be chump change in the context of Obamacare, but each item is only one small piece. Hospitals have a lot of ways to manipulate charges.
As you know, we’ve addressed how to get better price competition in hospitals often on this blog. First, a “common law” way to make prices transparent. Second, a consumer-driven market where patients control the money and make greater use of ambulatory facilities.
As I remember from reading the history of Medicare, the only way the law could pass in 1965 was if the government agreed to cover hospital costs. This may have seemed like an innocent concession at the time, but over the years it has had horrendous inflationary consequences. After 1984 we had the DGR’s that imposed some price discipline, but then outlier payments were kept on as a safety valve for hospitals to go out the old way and get cost-based reimbursement.
I am in total agreement with your solutions. My only caution would be this:
the ‘outlier’ cases tend to involve extremely complex medical conditions, and often combinations of heart disease and cancer, et al. The patients are in many cases at the end of their lives. I am not sure that giving these particular patients control of their Medicare money will really work.
Thank you. Back in 1965, hospitals were a higher priority than physicians. I am not sure I have a good enough grasp of the history to know how much they learned from Canada or other countries. However, when the Canadian provinces socialized health care, the hospitals went first. It took a few years for the doctors to follow.
Actually, the evolution of the Blues in the U.S. was similar: Blue Cross for hospitals first, then Blue Shield for doctors.
Also, I have asked why Medicare Part A is funded by payroll taxes and Part B funded by premium plus general government funds. The best answer I got is that the hospital lobbyists and the physician lobbyists were meeting with different sub-committees, so two completely different financing mechanisms found their way into the bill.