Defense Health Care: Under TRICARE, Children's Hospitals Paid More Than Other Hospitals After Accounting for Patient Complexity

GAO-07-947 Published: Jul 31, 2007. Publicly Released: Jul 31, 2007.
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Under the Department of Defense's (DOD) TRICARE health program, hospitals that treat primarily children--designated by DOD as children's hospitals--are paid differently from other types of civilian hospitals through a children's hospital differential payment. Representatives of children's hospitals state that payments for children's hospital services do not fully recognize the higher complexity of children's hospital patients. Acknowledging concerns over payments for children's hospital services, the National Defense Authorization Act for Fiscal Year 2006 directed GAO to study DOD's current system of payments to children's hospitals. This report examines (1) the effect of the differential on TRICARE's base payments to children's hospitals, (2) differences in diagnosis and complexity between TRICARE pediatric patients at children's hospitals and those at other hospitals, (3) the extent to which TRICARE payment differences across hospitals reflect differences in patient complexity, and (4) recent trends in TRICARE pediatric patients' use of children's hospital services. To do this, GAO analyzed pertinent TRICARE claims data for fiscal years 2003 through 2006 and interviewed relevant DOD officials and representatives of children's hospitals.

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