Medicare Hospital Reimbursement Policies “Unfair and Confusing”

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Daniel Sisto, president of the Healthcare Association of New York State, has penned an editorial for the Albany Times Union in response to a Dec. article that revealed how “Medicare’s hospital reimbursement policies are harming patients.”

Since the federal government is demanding that hospitals reduce Medicare spending and because Medicare can penalize hospitals that admit patients it judges to have been outpatients, many hospitals are starting to put patients on “‘observation’ status,” Sisto writes. “The federal government enforces these rules by auditing hospitals, looking at individual Medicare claims and medical records, and deciding whether the patient was appropriately classified.”

However, Sisto charges, “This Recovery Audit Contractor program is inconsistent, unfair, and contradictory,” especially since “federal auditors are second-guessing doctors and hospitals.” Also, the standards aren’t uniform, and as a result, hospitals aren’t exactly sure what they are trying to comply with.

Sisto offers as an example a patient who receives a pacemaker or a mastectomy. RAC auditors, who often do not have medical training, will acknowledge that these were necessary procedures, “but then will deny all payment because these patients should have gotten the complicated and invasive procedures as outpatients. Hospitals then are not allowed to bill for any of the services they have provided.”

This is why hospitals will instead put those patients on observation. After all, why risk running afoul of the RAC auditor’s subjective judgment call? But, Sisto writes, doing so “has other implications, too, such as the need for patients to pay substantial co-payments for drugs or services or affecting coverage for services after hospitalization.”

It is impossible to express in words how outrageous and unfair these policies are. Note again that many of these RAC auditors are not medically trained. Furthermore, note that the standards are so unclear that hospitals have no clue how to comply.

Yes, lawsuits are being filed and negative feedback is being given to the government, Sisto acknowledges, “yet nothing indicates these harmful practices will be changed. Meanwhile, the Medicare denials generate money for the government, consultants, and auditors at the expense of seniors and providers.”

It’s not that hospitals don’t want to work with the government or are mounting a revolt against these procedures. Actually, Sisto writes, they are just as committed to complying with these policies as they are to providing quality care to their patients. After all, most healthcare organizations are already investing millions of dollars to comply with federal standards.

“But these Medicare rules are unfair and confusing to patients and providers, and the RAC audit enforcement mechanism is a heavy-handed, blunt instrument that fails any sensible test of fairness or objectivity,” Sisto concludes. “It succeeds in extracting money from healthcare providers and using fear of more penalties to change how they make decisions about patient care.”

As healthcare leaders, what do you have to say about these rules? How does your healthcare organization try to comply with the federal government’s mixed messages? Have you unintentionally run afoul of the RAC auditors?

-by Pete Fernbaugh

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