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Outlier payments are intended to compensate hospitals for the high costs of patients that require an unusually high level of care and/or must stay in the hospital for unusually long periods before they can be discharged. The study found that the average total outlier payment per discharge increased from $303 in FY06 to $389 in FY09, an average increase of 9.5 percent per year.
A state-by-state comparison for the study period of average outlier payment per discharge with the average total IPPS payment per discharge highlights some interesting differences in the top and bottom five states. The top five states are the same except that the order is different and, in the case of outlier payments, Connecticut is replaced by Oregon, which experienced a very high average annual increase (16.7 percent) in outlier payments per discharge during the study period. By contrast, all five of the bottom states are different from the bottom five states with respect to total IPPS payment.
View Exhibit 1
Also, the gaps between the highest and lowest states with respect to outlier payments are very high (over 400 percent in FY06 and FY07) and widened under MS-DRGs (733.3 percent in FY08 and 482.2 percent in FY09).
Average Total DSH Payment per Discharge
The national average total DSH payment per discharge increased from $808 in FY06 to $960 in FY09, an average increase of 6.3 percent per year. Again, the top five states are similar to the top five states with respect to outlier payments, with a different order and with New York replacing Oregon in the case of DSH payments.However, the set of states in the bottom five is completely different from the bottom five with respect to outlier payments, and has only one state (Wyoming) in common with the bottom five states with respect to total IPPS payment.
View Exhibit 2
Average DSH payments for the top five states are much higher than the national averages and the bottom five states are much lower. The resulting gaps between the highest and lowest states are very high (well above 500 percent every year) but remain relatively stable from DRGs to MS-DRGs. This suggests that the top five states have much higher levels of low-income Medicare and Medicaid patient populations than the national average and the bottom five states.
The study findings also suggest that the bottom five states experienced wide fluctuations in the levels of low-income Medicare and Medicaid patient populations. Wisconsin DSH payments per discharge increased from $372 in FY06 to $495 in FY09, an average annual increase of 11.0 percent, the highest increase among the bottom five states. This finding suggests that Wisconsin's levels of low-income Medicare and Medicaid patients were lower than the national averages, but that the levels are growing rapidly. The DSH payments per discharge in Wyoming, on the other hand, decreased significantly during the study period (an average annual decrease of 2.8 percent), suggesting Wyoming hospitals' levels of low-income Medicare and Medicaid patient populations are decreasing.
Average Total IME-GME Payment per Discharge
The study found that the national average total IME-GME payment per discharge increased from $698 in FY06 to $827 in FY09, an average increase of 6.2 percent per year. The study also detected considerable differences in the top and bottom states compared with other types of payment examined. Rhode Island, Massachusetts, and Connecticut joined the top five while Alaska, Hawaii, and California were not included in the top five for the first time. Meanwhile, three new states joined the bottom five for the first time (South Dakota, Idaho, and Montana).
View Exhibit 3
The gaps between the highest and lowest states are extreme for this payment component. The average total IME-GME payment per discharge in New York ranged from $2,267 in FY06 to $2,688 in FY09, compared with the payments per discharge in Montana ranging from $55 in FY06 to $49 in FY09. The payment gap is well over 4,000 percent in almost every year studied.
Every state studied had at least one approved teaching program, but it is noteworthy to see the concentration of very high payments in the northeastern part of the country (New York, District of Columbia, Rhode Island, Massachusetts, and Connecticut) and very low payments in other parts of the country (South Dakota, Mississippi, Wyoming, Idaho, and Montana). This finding suggests that approved teaching programs are not evenly distributed across the country.
Average Total Capital and Other Pass-Through Cost Payment per Discharge
IPPS allows for certain special pass-through payments for unusual capital costs and other costs that are determined on a hospital-specific basis. The national average payment for such special pass-through payments increased from $820 in FY06 to $881 in FY09, an average increase of 2.5 percent per year.
The payment difference from the highest to the lowest states remained relatively stable from FY06 (130.1 percent under DRGs) to FY09 (108.0 percent under MS-DRGs). The findings for the study period show little difference in payment within the groups of the top five and bottom five states. Also, the difference in the average annual increases among the high and low states is fairly low. This finding suggests that capital costs are not as variable across the country as operational costs and that these costs have been rising at a lower rate than operational costs.
View Exhibit 4
For more information, see Thomas M. Schuhmann's "Understanding Variation in Medicare Inpatient Payment" in the October 2010 issue of hfm.
Publication Date: Friday, October 01, 2010