Medicare Compliance & Reimbursement

GAO: 'Payment for drugs, devices, services does not uniformly reflect hospitals' costs.'

Many hospitals have noticed that their pay for new drugs and devices has dwindled under the outpatient prospective pay system. Drug and device reps say that OPPS reimbursement isn't covering hospitals' costs - and that could threaten patient access.

So, why aren't hospitals getting a fair shake? In a September report, "Information Needed to Assess Adequacy of Rate-Setting Methodology for Payments for Hospital Outpatient Services" (GAO-04-772), the General Accounting Office says that flawed calculations of excluded claims are partly to blame. The Centers for Medicare & Medicaid Services uses outpatient hospital claims to calculate costs and set payment rates, but these may not be a reliable indicator. CMS has excluded more than 40 percent of multiple-service claims because when you report multiple primary services CMS cannot associate each packaged service with a specific primary service. Currently, the agency has no way to determine the exclusion's effect on OPPS rates, the GAO says.

Hospital charge setting practices are another problem. Based on information from 113 hospitals, the GAO found that not all hospitals mark up the cost of drugs, devices or services by the same percent, which causes a wide variance across hospitals and even across departments within a hospital.

CMS says it will consider the GAO report recommendations. To read the report, go to
http://www.gao.gov/new.items/d04772.pdf.

Lesson Learned: Relief may be in sight for hospitals struggling to recover the costs of new devices, drugs and services.