Critical access hospitals often cost more than acute-care hospitals for Medicare outpatients

Medicare beneficiaries who received outpatient services at critical access hospitals in 2012 typically paid significantly more out-of-pocket for their care than they would have at acute-care hospitals, according to an HHS Office of Inspector General report.

Medicare beneficiaries' average coinsurance amounts for 10 frequently provided outpatient services at critical access hospitals were between two and six times greater than the coinsurance for the same services at acute-care hospitals, according to the report. For electrocardiogram tracing (the most frequently provided outpatient service included in the OIG's analysis), beneficiaries who received care at critical access hospitals had an average coinsurance rate higher than the entire Outpatient Prospective Payment System reimbursement rate for acute-care hospitals. Medicare reimburses critical access hospitals at 101 percent of what it considers their reasonable costs, rather than using the predetermined OPPS rates.

Furthermore, of the estimated $3.2 billion critical access hospitals received in reimbursement for outpatient services provided in 2012, beneficiaries' coinsurance accounted for approximately $1.5 billion — 47 percent.  By contrast, coinsurance rates for Medicare beneficiaries accounted for an average of 22 percent of the OPPS rates for outpatient services at acute-care hospitals.

The high coinsurance rates stem from the fact that critical access hospitals charged on average more than double the average costs of the outpatient services (and, subsequently, double the OPPS rate for acute-care hospitals), according to the OIG. "This can happen because charges are not required to be tied to costs in any way; CAHs are allowed to set their charges at any rate," the report states. "Because charges are higher than costs, the amount of coinsurance calculated from charges can constitute a significant proportion of the cost."

Based on these findings, the OIG has recommended that CMS draft and submit to HHS a legislative proposal that would change how coinsurance is calculated for critical access hospital patients. For instance, CMS could change its payment process to treat critical access hospital outpatient claims as if they were being paid under the OPPS and therefore charge OPPS coinsurance rates.

Lowering coinsurance rates would increase the amount Medicare pays critical access hospitals for outpatient services, since the program pays the difference between the cost of services and what beneficiaries pay, according to the OIG. Still, CMS could also seek legislative changes to mitigate the increase in Medicare payments through avenues such as ensuring only critical access hospitals that meet all participation requirements receive cost-based reimbursement.

CMS neither concurred nor disagreed with the OIG's recommendations. A letter to HHS Inspector General Daniel Levinson from CMS Administrator Marilyn Tavenner simply states that "CMS thanks the OIG for their efforts on this issue and looks forward to working with OIG on this and other issues in the future."


Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars