Almost All Hospitals Receive Medicare Pay Adjustments, GAO Says

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Medicare's inpatient prospective payment system has undergone many changes since Congress created it in 1983, and most hospitals actually receive enhanced Medicare payments or exemptions, which actually goes against the original intent of the IPPS, according to a report from the Government Accountability Office.

The GAO reviewed data for 4,783 hospitals across the United States and found 91 percent received at least one Medicare payment enhancement or were excluded from the IPPS entirely. Roughly 63 percent of hospitals qualified for at least one form of increased Medicare payment, such as disproportionate share hospital payments or graduate medical education payments, while 28 percent of hospitals were exempted from IPPS under the critical access hospital program.

Nine percent, or only 416 hospitals, received Medicare payment that were unadjusted, as the IPPS originally intended.

The GAO concluded that because Congress has enacted several "piecemeal" and "individual fixes" to the IPPS, it has led to most hospitals receiving payment modifications and add-ons that increase Medicare spending — and many hospitals either rely on or expect those payments. In addition, the GAO said the Institute of Medicine and the Medicare Payment Advisory Commission have said the current system of exceptions and payment add-ons "undermine[s] the integrity of the IPPS."

"Taken together, these findings and recommendations suggest that, 30 years after the IPPS was implemented, the way Medicare currently pays hospitals may no longer ensure that the goals of the payment system — cost control, efficiency and access — are being met," the GAO report said.

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