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. 2009 Jul-Aug;28(4):1154-60.
doi: 10.1377/hlthaff.28.4.1154.

Outlier payments for cardiac surgery and hospital quality

Onur Baser  1 , Zhahoui Fan, Justin B Dimick, Douglas O Staiger, John D Birkmeyer
Affiliations

Outlier payments for cardiac surgery and hospital quality

Onur Baser et al. Health Aff (Millwood). 2009 Jul-Aug.

Abstract

In 2002, several hospitals in the Tenet system were accused of overbilling Medicare for cardiac surgery. This led to increased scrutiny of so-called outlier payments, which are used to compensate hospitals when actual costs far exceed those anticipated under prospective payment. Since then, the overall proportion of coronary artery bypass graft (CABG) procedures associated with outlier payments has fallen from 13 percent in 2000-02 to 8 percent in 2003-06. Still, there is variation across U.S. hospitals, with some hospitals experiencing much higher rates. These findings imply that there is potential for quality improvement to reduce costs while improving morbidity and mortality.

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References

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    1. Medicare fiscal intermediaries determine hospital CCRs based on cost reports filed by hospitals. The CCR represents the estimated true costs of services (within defined categories) listed on the hospital's cost report, divided by gross charges in effect during the cost report period.

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    1. Among other changes, the CMS closed a longstanding accounting loophole often exploited by hospitals. In previous years, hospitals were allowed to use the statewide average CCR if their own CCRs fell outside three standard deviations from the statewide average. By raising their charges sufficiently, hospitals could reduce their CCRs low enough to trigger the statewide average provision. In this scenario, a hospital's very high covered charges would be multiplied by a much higher CCR, leading to a substantial overstatement of covered costs and much higher outlier payments. The CMS eliminated this statewide average provision in 2003.

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