Nov. 14—Contract auditors have been told to increase their scrutiny of Medicare outlier payments after a federal watchdog raised concerns about such payments.

The Centers for Medicare & Medicaid Services (CMS) agreed to direct contract auditors to increase their scrutiny of supplemental Medicare payments to hospitals, known as outlier payments. These payments aim to prevent significant financial losses at hospitals that have unusually costly patient-care cases.

Outlier payments are influenced by the charges hospitals use instead of the predetermined payment amounts provided for most Medicare hospital claims, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) noted in a report.

The OIG report examined whether changes HHS implemented in 2003 to prevent payments spikes stemming from hospitals’ “aggressively increasing charges” worked as intended.

The OIG found that outlier payments to 158 hospitals averaged 12.8 percent of hospitals’ Medicare inpatient prospective payment system payments, compared with an average of only 2.2 percent for all other hospitals. Those hospitals “charged Medicare substantially more for the same Medicare severity-adjusted diagnosis-related group (MS-DRG), even though their patients had similar lengths of stay as those in all other hospitals.” Additionally, the OIG found that some MS-DRGs triggered outlier payments frequently, such as the 16 MS-DRGs that accounted for 41 percent of outlier payments.

“In some cases, high charges could be the result of high costs because hospitals attract a disproportionate share of exceptionally costly patients or apply costly technologies and treatments,” the OIG report stated. “Still, the routine receipt of outlier payments for certain MS-DRGs at high-outlier hospitals raises concerns about why charges for similar patient-care cases vary substantially across hospitals.”

Because of its finding, the OIG recommended CMS direct its contractors to increase monitoring of outlier payments. Additionally CMS agreed to include information about the distribution of outlier payments with other publicly reported hospital data and examine whether MS-DRGs associated with high rates of outlier payments warrant coding changes or other adjustments.

Publication Date: Thursday, November 14, 2013