Exceptions are the rule

Hospital payment system full of adjustments

Congress’ nonpartisan investigative arm reported that 91% of hospitals paid by Medicare receive some dispensation or add-on to the program’s standard payment system. The Inpatient Prospective Payment System was designed to maximize “cost-control, efficiency and access” when it was launched 30 years ago, according to the Government Accountability Office report. But Congress has piled on an accumulating number of exemptions and carve-outs for various types of hospitals.

The agency’s other findings include that 63% of hospitals qualify for at least one of four types of payment increases; 28% of hospitals receive an exemption from IPPS through the critical-access hospital program; and Congress has enacted 15 changes to boost payments for various groups of hospitals.

For nearly all hospitals, those tweaks have added up to payments that exceed Medicare’s standard rates. But some hospitals have benefited more than others. For instance, the GAO found 70 hospitals received four types of additional payments on top of the standard Medicare reimbursements.

The senators who requested the report said the findings support the previous conclusions of the Institute of Medicine and the Medicare Payment Advisory Commission that numerous modifications to the payment system have undermined its integrity. The widespread carve-outs, they said, indicate that an overhaul is needed.

“It’s another indicator of the need to strengthen and improve Medicare to better serve seniors and taxpayers,” Sen. Richard Burr (R-N.C.) said in a news release.

The trade group for rural hospitals— among the biggest beneficiaries of the modifications—countered that the IPPS system was designed primarily for high-volume providers. “But in low-volume environments, this is not an appropriate mechanism to ensure that you are able to sustain organizations to carry out their missions,” said Brock Slabach, a senior vice president at the National Rural Health Association.

The changes to IPPS were needed after nearly 400 hospitals—many of them rural facilities—closed between 1983, when Congress launched the IPPS system, and 1995, Slabach said. “These are corrections to a poorly designed system in the first place.”