Payment for Inpatient Alcoholism Detoxification and Rehabilitation Services Under Medicare Needs Attention

HRD-85-60: Published: Apr 29, 1985. Publicly Released: Apr 29, 1985.

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Under Medicare's prospective payment system (PPS), hospitals are paid on the basis of patient illness and receive predetermined rates for treating patients with the same diagnosis which are combined into diagnosis related groups (DRG). GAO evaluated hospitals' compliance with Medicare guidelines for inpatient treatment of alcohol abuse and examined the effects of PPS rates on the delivery and payment of alcoholism treatment services.

GAO found that PPS rates do not accurately reflect the cost of alcoholism care for most individual cases because the rates do not typify actual treatments. As a result, the payment rates may overpay hospitals for one treatment and underpay for other treatments giving hospitals economic incentives to provide the overpaid treatments and disincentives to provide the underpaid treatments, regardless of the need. The Health Care Financing Administration (HCFA), in its efforts to obtain better data to develop prospective rates for alcoholism treatments, has made no provisions to check the accuracy of hospitals' reports concerning whether treatments included detoxification services, rehabilitation services, or both. GAO also found that Medicare provides guidelines that limit coverage for alcohol-related services, but that Peer Review Program (PRO) intermediaries have not adequately enforced the guidelines resulting in questionable payments for alcoholism care. PRO intermediaries may improve alcoholism claims review efforts, but many PRO contracts do not contain assurances that all aspects of Medicare's guidelines will be applied in the reviews.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HCFA revised the alcoholism DRG in line with this recommendation in the September 3, 1985, modifications to PPS. The changes became effective for hospital cost reporting periods beginning on or after October 1, 1987.

    Recommendation: The Administrator, HCFA, should refine the study of alcoholism treatment DRG by: (1) verifying, on a sample basis, the data submitted by hospitals; and (2) identifying and accounting for all types of treatments, including detoxification, rehabilitation, combination, and recap or reinforcement treatments.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

  2. Status: Closed - Implemented

    Comments: HCFA informed GAO that any action taken in regard to this recommendation will occur during the next cycle of PRO contract awards. The scope of work statement for PRO contracts covering FY 1987 and 1988 specifically directs PRO to use HCFA coverage guidelines when reviewing alcoholism treatment.

    Recommendation: The Administrator, HCFA, should ensure that PRO intermediaries use alcoholism treatment review criteria that are consistent with and cover all aspects of Medicare guidelines for alcoholism treatments.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration


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