Medicare: GAO Views on the Payment System for Outpatient Cataract Surgery

GAO discussed its review of the Medicare payment approach for hospital outpatient cataract surgery. GAO found that: (1) Medicare hospital payments for outpatient cataract surgery were significantly higher than for ambulatory surgical centers; (2) hospitals base beneficiary or co-insurance payments on service charges, rather than on Medicare-computed costs, and many beneficiaries pay more than the intended 20 percent; (3) hospitals generally allocate administrative and general overhead costs to their outpatient service charges to offset anticipated losses; and (4) Medicare cost-based methods do not ensure that payments are cost-efficient for services delivered to Medicare beneficiaries. GAO also found that: (1) Medicare reimbursement methods for intraocular lens (IOL) implants did not provide hospitals an incentive to negotiate for lower prices; (2) hospitals failed to adequately document the need for surgery in about 45 percent of the cases it reviewed; (3) the Department of Health and Human Services proposed limiting clinical reimbursements for IOL implants to $200 and hospital reimbursements to acquisition costs plus a flat rate; and (4) the Health Care Financing Administration (HCFA) contracted with peer review organizations to preapprove outpatient cataract surgeries. GAO believes that HCFA needs to collect data on IOL acquisition costs and procurement practices to ensure savings to Medicare and beneficiaries.