Outpatient Costs Higher for Rural Hospital Medicare Patients
- A new report from the inspector general at the Department of Health and Human Services (HHS), found that medicare beneficiaries treated at primary rural “critical access” hospitals (CAHs) pay more for outpatient services than those at other hospitals.
Across the United States, there are more than 1,300 CAHs. They were created as part of the Balanced Budget Act of 1997 to ensure that hospital care would be accessible to beneficiaries in rural communities. Small hospitals that qualify – typically the sole hospital in rural areas with no more than 25 beds – can become certified and receive favorable Medicare reimbursements.
Medicare pays CAHs through a different process than most other hospitals. CAHs receive 101 percent of “reasonable costs” for outpatient services provided. This is determined through a cost report provided by the hospital. In contrast, Medicare pays for outpatient services at most acute-care hospitals using the outpatient payment system (OPPS) which provides predetermined rates.
Medicare requires patients to pay 20 percent of the amount a CAH charges. At other hospitals, patients also pay 20 percent but is based on the amount Medicare decides to reimburse the hospital, which can be significantly below what the hospital charges.
Using 2009 and 2012 claims data, OIG calculated the percentages and amounts of coinsurance that Medicare beneficiaries paid toward the costs for outpatient services at CAHs. It also examined the percentages and amounts of coinsurance that beneficiaries would pay at acute-care hospitals for 10 outpatient services that were frequently provided at CAHs.
For example, the report found that in 2012, Medicare patients receiving an electrocardiogram at a CAH owed an average of $33, while those at other hospitals paid $5. Patients getting an initial infusion into a vein paid $56 at a CAH and $25 at other hospitals.
Using this process, the report found that in 2012, beneficiaries paid approximately $1.5 billion of the estimated $3.2 billion cost for CAH outpatient services and the average percentage of cost increased two percentage points between 2009 and 2012. For the 10 outpatient services examined at CAHs, patients paid between two and six times the amount in coinsurance than they would have for the same services at acute-care hospitals.
The report offered some recommendations for how the Centers for Medicare & Medicaid Services (CMS) can reduce the difference in what patients pay.
“Some ways in which CMS could modify how coinsurance is calculated for such services include (1) computing coinsurance so that it is based on interim payment rates rather than charges and (2) processing claims for outpatient services at CAHs as if they were paid under OPPS for the purpose of calculating an OPPS-equivalent coinsurance,” the report states.
However, these changes may be easier said than done. According to Brock Slabach, a senior vice president at the National Rural Health Association, this is an issue that has been raised in the past by the Medicare Payment Advisory Commission (MedPAC) in 2011. Speaking with Kaiser Health News, Slabach said the way the law currently reads, critical access hospitals must be paid their “reasonable” costs. To fix this, Congress would need to either change the law or Medicare would need to pay more to make up for the lower patient portions.
“The reason this hasn’t been solved is it would require the Medicare program to subsidize more,” Slabach said.
