Using the preliminary FY06 Medicare Provider Analysis and Review (MedPAR) file that was used in promulgating the inpatient prospective payment system (IPPS) proposed regulations for FY08, an analysis by American Hospital Directory showed that total outlier payments will be declining each year--even though statutory provisions call for 5 percent to 6 percent of total payments to be paid for outliers. According to the analysis, the outlier percentage was 4.6 percent in FY06, and is predicted to fall to 3.1 percent for FY08.
Although this projection does not account for inflation in charges and changes in cost-to-charge ratios, it nevertheless indicates that proposed regulations may significantly underpay hospitals for treating unusually costly cases. Each 1 percent of underpayment represents a national shortfall of more than $1 billion.
American Hospital Directory performed its analysis using FY06 Medicare inpatient claims with IPPS payment computed for FY06-08 according to respective regulations. More than 3,000 short-term acute care hospitals were included in the analysis, representing nearly $110 billion in IPPS payments per year. Read the announcement.
