Revised geographic adjustments could improve accuracy of Medicare payments

July 17, 2012

Changing the way that Medicare payments are adjusted to account for regional variations in the cost of providing care as recommended by a previous report from the Institute of Medicine would result in payment increases for some hospitals and practitioners and decreases for others, concludes the Phase II report from the IOM study. Geographic adjustments should be used to ensure the accuracy of payments, said the committee that wrote the report, but they are not optimal tools to tackle larger national policy goals such as improving access to care in medically underserved areas.

Adjustments to Medicare payments based on geography are intended to account for regional variations in wages, rents, and other costs incurred by hospitals and individual health care practitioners. Federal law requires geographic adjustments to be budget neutral, meaning any increase in the amount paid to one hospital or practitioner must be offset by a decrease to others. In its previous report, the committee recommended changes to the data sources and methods used to calculate payment adjustments to achieve greater accuracy.

Using a series of statistical simulations and analyses in the second phase of the study, the committee concluded that its recommendations, if adopted by the , would improve the technical accuracy of payments, and these payments would increase or decrease by less than 5 percent on average for the majority of hospitals and most physicians. The committee acknowledged that seemingly small percentages could make significant differences to providers and organizations striving to provide high-value health care. The simulations showed that the committee's proposed new approach using data from the would yield generally higher relative hospital wages in rural areas than the current approach using . The changes in how practitioner payments are calculated would result in an overall payment reduction of just under 3 percent to health professionals in nonmetropolitan counties and an aggregate increase of less than half of 1 percent to those practicing in metropolitan counties.

There is a general perception that variations in payment rates could affect where health professionals decide to practice and contribute to regional differences in the availability and quality of care. Given the relatively modest payment changes that would occur in many regions and given that geographic adjustments are only one factor in Medicare payments, revising these calculations may not have a significant overall impact on the distribution of providers and on improving care access and quality, the report says.

Although most Medicare beneficiaries have good access to health care, the ease of finding providers who accept Medicare patients is more limited in medically underserved rural and metropolitan regions and areas that include disproportionately high numbers of racial and ethnic minorities. There are several strategies that would be more effective at boosting access to care than geographic payment adjustments, the committee concluded. For example, Medicare should support policies that enable all qualified to practice to the full extent of their education and training. The supply of primary care services in underserved areas could be increased if state licensing and credentialing laws consistently allowed broader scope of practice for the complete range of professionals, such as nurse practitioners and physician assistants. The report also recommends that Medicare pay for telemedicine and other services that enable clinicians to reach more patients in underserved areas.

"The exercise of applying the recommendations from our Phase I report confirmed that using the data sources and methods we proposed would improve the accuracy of ," said committee chair Frank Sloan, J. Alexander McMahon Professor of Health Policy and Management and professor of economics, Duke University, Durham, N.C. "Payment accuracy is important, but geographic adjustments are not the optimal way to achieve larger goals, such as ensuring access to clinicians or reducing disparities in care. Such objectives should be addressed through other means."

Explore further: Medicare should employ new data sources, methods to ensure accuracy of geographic adjustments to payments

More information: Pre-publication copies of Geographic Adjustment in Medicare Payment, Phase II: Implications for Access, Quality, and Efficiency are available from the National Academies Press; tel. 202-334-3313 or 1-800-624-6242 or on the Internet at www.nap.edu or www.iom.edu/adjustmentimpact

Related Stories

Medicare should employ new data sources, methods to ensure accuracy of geographic adjustments to payments

June 1, 2011
Geographic adjustments to Medicare payments are intended to accurately and equitably cover regional variations in wages, rents, and other costs incurred by hospitals and individual health care practitioners, but almost 40 ...

AMA committee recommendations on doctor fees set by Medicare are followed 9 times out of 10

May 7, 2012
To calculate physicians' fees under Medicare – which in turn influence some state and private payers' decisions on how they will pay doctors -- the Centers for Medicare and Medicaid Services (CMS) relies on the recommendations ...

Windfall for Massachusetts hospitals is questioned

August 4, 2011
(AP) -- An obscure provision tucked into the federal health care law has turned into a jackpot for Massachusetts hospitals, but officials in other states are upset because the money will come from their hospitals.

Recommended for you

To combat teen smoking, health experts recommend R ratings for movies that depict tobacco use

July 21, 2017
Public health experts have an unusual suggestion for reducing teen smoking: Give just about any movie that depicts tobacco use an automatic R rating.

Aging Americans enjoy longer life, better health when avoiding three risky behaviors

July 20, 2017
We've heard it before from our doctors and other health experts: Keep your weight down, don't smoke and cut back on the alcohol if you want to live longer.

Opioids and obesity, not 'despair deaths,' raising mortality rates for white Americans

July 20, 2017
Drug-related deaths among middle-aged white men increased more than 25-fold between 1980 and 2014, with the bulk of that spike occurring since the mid-1990s when addictive prescription opioids became broadly available, according ...

Parents have critical role in preventing teen drinking

July 20, 2017
Fewer teenagers are drinking alcohol but more needs to be done to curb the drinking habits of Australian school students, based on the findings of the latest study by Adelaide researchers.

Fresh fish oil lowers diabetes risk in rat offspring

July 19, 2017
Fresh fish oil given to overweight pregnant rats prevented their offspring from developing a major diabetes risk factor, Auckland researchers have found.

High-dose vitamin D doesn't appear to reduce the winter sniffles for children

July 18, 2017
Giving children high doses of vitamin D doesn't appear to reduce the winter sniffles, a new study has found.

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.