Alternatives for Computing Payments for Hospital Outpatient Surgery

HRD-90-78: Published: Apr 3, 1990. Publicly Released: Apr 3, 1990.

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Pursuant to a congressional request, GAO reviewed three alternatives to the current Medicare payment methodology for hospital outpatient surgery.

GAO found that Medicare's: (1) hospital payment system had problems in computing and applying beneficiary coinsurance amounts; and (2) outpatient payment computation method did not take full advantage of beneficiary coinsurance amounts to reduce its payments. GAO also found that: (1) under one alternative, billed charges would be converted to Medicare-allowable costs by using the hospital's cost-to-charge ratio combined with ambulatory surgery center payment amounts; (2) another alternative would base beneficiary coinsurance on Medicare-allowable costs, rather than on hospital-submitted charges; and (3) another alternative would make the beneficiary coinsurance payment exactly 20 percent of the Medicare blended amount. GAO also noted that: (1) the third alternative would result in the greatest beneficiary liability reduction with the highest Medicare payment and would require the implementation of a prospective payment system; (2) the second alternative would split the reduction in the hospital payment between the Medicare program and the beneficiary; and (3) the first alternative would result in no beneficiary relief.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress elected not to revise the current payment system but to move toward a prospective payment system for hospital outpatient surgery.

    Matter: Because it may be some time before a prospective payment system for hospital outpatient surgery is designed and implemented, Congress should consider an interim solution to the shortcomings of the current payment methodology. Depending on the policy objectives to be satisfied, either the first or second alternative presented in this report would be suitable.


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