IOM: Healthcare Payments Shouldn't Be Based on Geography

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A new report from the Institute of Medicine said Medicare payments should not be based on a geographic-based index, and instead, CMS should continue down the path of paying hospitals and providers for sharing clinical data, coordinating patient care and taking on financial risk for the health of their populations.

In 2010, HHS commissioned the IOM, under the Patient Protection and Affordable Care Act, to find out how geography plays a role in Medicare reimbursements to hospitals, physicians and other providers. The IOM has released several reports since then, including last July and this past March.

The most recent report, released Wednesday, put a definitive conclusion on Medicare and commercial healthcare spending from the IOM, saying healthcare decisions are made at the local level and not by geographic areas defined by Congress.

The IOM and policy analysts have studied healthcare spending variation in Medicare, Medicaid and the commercial sector for the past couple decades. In the most recent report, the researchers said "an overall explanation for geographic variation remains elusive," but there have been key drivers in the fluctuation of Medicare spending — most notably post-acute care areas like skilled nursing homes. In addition, the report says variation in spending within the commercial insurance market is "due mainly to differences in price markups by providers rather than to differences in the utilization of healthcare services."

IOM researchers did not endorse a geographic-based value index for Medicare reimbursements because "geographic units are not where most healthcare decisions are made," according to the report. "A geographic value index would be a poorly targeted mechanism for encouraging value improvement — it would be neither fair nor likely to improve the value of services offered by individual providers."

To achieve an efficient pay-for-performance system, the IOM suggested CMS make Medicare and Medicaid data more accessible, and CMS should partner with commercial payers to build a collaborative public-private payment system.

More Articles on Healthcare Finance:
10 Obstacles Hospitals Face in Achieving Cost Savings
IOM Makes 6 Recommendations for Population Health Quality Measures
Study: Population Health May Drive Geographic Variation in Medicare Costs

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