OIG: Hospital prices driving up outlier payments

Hospitals' "sticker prices" are padding outlier payments, according to a new report from the Department of Health and Human Services' Office of Inspector General.

The vast majority of hospitals received outlier payments--supplemental payments meant to offset unusually high-cost patient-care cases--and some received a much larger proportion of their Medicare Inpatient Prospective Payment System (IPPS) reimbursements from these payments, the OIG report said. Inspectors found that at 158 hospitals, an average of 12.8 percent of Medicare IPPS reimbursements derived from outlier payments. At all other hospitals, the report states, outlier payments accounted for only 2.2 percent of reimbursements.

The average outlier payment between 2008 and 2011 was $15,482, but a minority of payments--6 percent--were in excess of $50,000, according to the report. The largest outlier payment for a single claim during the study period was $1.4 million.

"Although hospital charges do not affect the Medicare payment amount on most IPPS claims, hospital charges directly affect whether a hospital receives an outlier payment and, if so, the amount of payment," the report states.

Hospitals with higher outlier payments were more likely to be larger, in urban areas and teaching hospitals, but patients' average length of stay was not significantly longer at these hospitals than at lower-priced hospitals, according to the OIG. "This suggests that high charges are not necessarily associated with more care for patients," the report states.

The OIG makes three recommendations to address disproportionate outlier payments:

  • Increase monitoring of outlier payments by the Centers for Medicare & Medicaid Services;

  • Add data about outlier payment distribution to public hospital data; and

  • Analyze whether coding changes or other adjustments are necessary for Medical Severity Diagnostic Related Groups (MS-DRGs) with higher rates of outlier payments.

A 2012 OIG report found that CMS failed to collect nearly $700 million in outlier overpayments between 2005 and 2010, FierceHealthFinance previously reported.

To learn more:
- read the report (.pdf)