IOM: Medicare Geographic Adjustments Could Improve Payment Accuracy

Medicare's geographic adjustments in fee-for-service payments to hospitals have brought about inconsistencies over the years. Altering those adjustments could improve payment accuracy, but it will not address healthcare quality and access issues, according to a report from the Institute of Medicine (pdf).

Medicare adjusts payments to hospitals and other providers based on where they are located geographically. This system is in place because the cost of providing healthcare varies across different regions around the United States — high-cost areas receive higher payments relative to the national average, while lower-cost areas receive lower payments.

An IOM committee released the report as the second part of an HHS-commissioned project. In the first part, completed in May 2011, the IOM recommended a number of changes to the current Medicare geographic adjustments: using the same geographic boundaries and payment areas for hospitals and practitioners, using different data sets to compute clinical and administration hospital staff compensation and others.

Using statistical simulations, the IOM found 88 percent of Medicare hospital discharges and 96 percent of Medicare physician billings would change by less than 5 percent on average, according to the report. The committee concluded that geographic adjustments are an important aspect to the Medicare program, but they should only be used to improve payment accuracy.

"Further, the committee concludes that geographic adjustment of Medicare payments is not an appropriate approach for achieving such national policy goals as changing the composition and distribution of healthcare providers," according to the report.

To reach more equitable levels of quality care and access to care for Medicare beneficiaries, the IOM recommended CMS develop policies that promote access to primary care services and expand telehealth services, among others.

More Articles on Medicare Geographic Adjustments:

IOM Report: Changes Needed for Geographic Adjustments to Medicare Payments

The 2012 Payroll Tax-SGR Bill: What It Means for Hospitals

AHA Urges Congress to Extend Nine Expiring Medicare Policies

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