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Geographic Adjustment in Medicare Payment
Editors: Margaret Edmunds and Frank A. Sloan. Authors: Committee on Geographic Adjustment Factors in Medicare Payment; Board on Health Care Services; Institute of Medicine.
Medicare is the largest health insurer in the United States, providing coverage for 39 million people aged 65 and older and 8 million people with disabilities, and reaching more than an estimated $500 billion in payments in 2010. Although Medicare is a national program, it adjusts fee-for-service payments according to the geographic location of a practice. While there is widespread agreement about the importance of providing accurate payments to providers, there is disagreement about how best to adjust payment based on geographic location.
At the request of Congress and the Department of Health and Human Services (HHS), the Institute of Medicine (IOM) examined ways to improve the accuracy of data sources and methods used for making the geographic adjustments to payments. The IOM recommends an integrated approach that includes moving to a single source of wage and benefits data; changing to one set of payment areas; and expanding the range of occupations included in the index calculations. The first of two reports, Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy, assesses existing practices in regards to accuracy, criteria consistency, evidence for adjustment, sound rationale, transparency, and separate policy adjustments to reform the current payment system. Adopting the recommendations outlined in this report will mean a change in the way that the indexes are calculated, and will require a combination of legislative, rule-making, and administrative actions, as well as a period of public comment. Geographic Adjustment in Medicare Payment will inform the work of government agencies such as HHS, the Centers for Medicare and Medicaid Services, congressional members and staff, the health care industry, national professional organizations and state medical and nursing societies, and Medicare advocacy groups.
Contents
- THE NATIONAL ACADEMIES
- COMMITTEE ON GEOGRAPHIC ADJUSTMENT FACTORS IN MEDICARE PAYMENT
- Reviewers
- Acknowledgments
- Acronyms
- Glossary
- Summary
- 1. Introduction and Overview
- 2. Labor Markets and Payment Areas
- 3. Hospital Wage Index
- 4. Smoothing the Borders of Labor Markets and Payment Areas
- 5. Geographic Practice Cost Indexes
- 6. Transitions
- APPENDIXES
- Appendix A Committee and Staff Biographies
- Appendix B Public Committee Meeting Agendas
- Appendix C List of Contributors and Participants
- Appendix D Statistical Reliability of the Bureau of Labor Statistics (BLS) Wage Data
- Appendix E Comparison of the Medicare Payment Advisory Commission (MedPAC) and Institute of Medicine (IOM) Proposals for Alternative Hospital Wage Indexes (HWIs)
- Appendix F Description of Three Optional Sources for Facility Wage Index Data
- Appendix G RTI Analysis Data Sources
- Appendix H S-3 Worksheet
- Appendix I Physician Work Adjustment
This study was supported by Contract No. HHS P23320042509XI, Task Order No. HHS P23337012T between the National Academy of Sciences and the Centers for Medicare and Medicaid Services. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the organizations or agencies that provided support for this project.
“This study was supported by Contract No. HHS P23320042509XI, Task Order No. HHS P23337012T between the National Academy of Sciences and the Centers for Medicare and Medicaid Services”—T.p. verso.
Suggested citation:
IOM (Institute of Medicine). 2012. Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy. Washington, DC: The National Academies Press.
NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
- NLM CatalogRelated NLM Catalog Entries
- Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2017 Rates; Quality Reporting Requirements for Specific Providers; Graduate Medical Education; Hospital Notification Procedures Applicable to Beneficiaries Receiving Observation Services; Technical Changes Relating to Costs to Organizations and Medicare Cost Reports; Finalization of Interim Final Rules With Comment Period on LTCH PPS Payments for Severe Wounds, Modifications of Limitations on Redesignation by the Medicare Geographic Classification Review Board, and Extensions of Payments to MDHs and Low-Volume Hospitals. Final rule.[Fed Regist. 2016]Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2017 Rates; Quality Reporting Requirements for Specific Providers; Graduate Medical Education; Hospital Notification Procedures Applicable to Beneficiaries Receiving Observation Services; Technical Changes Relating to Costs to Organizations and Medicare Cost Reports; Finalization of Interim Final Rules With Comment Period on LTCH PPS Payments for Severe Wounds, Modifications of Limitations on Redesignation by the Medicare Geographic Classification Review Board, and Extensions of Payments to MDHs and Low-Volume Hospitals. Final rule.Centers for Medicare and Medicaid Services (CMS), HHS. Fed Regist. 2016 Aug 22; 81(162):56761-7345.
- Medicare program; revisions to payment policies under the physician fee schedule for calendar year 2003 and inclusion of registered nurses in the personnel provision of the critical access hospital emergency services requirement for frontier areas and remote locations. Final rule with comment period.[Fed Regist. 2002]Medicare program; revisions to payment policies under the physician fee schedule for calendar year 2003 and inclusion of registered nurses in the personnel provision of the critical access hospital emergency services requirement for frontier areas and remote locations. Final rule with comment period.Centers for Medicare & Medicaid Services (CMS), HHS. Fed Regist. 2002 Dec 31; 67(251):79965-80184.
- Review Geographic Adjustment in Medicare Payment: Phase II: Implications for Access, Quality, and Efficiency[ 2011]Review Geographic Adjustment in Medicare Payment: Phase II: Implications for Access, Quality, and EfficiencyEdmunds M, Sloan FA, Steinwald AB, Committee on Geographic Adjustment Factors in Medicare Payment, Board on Health Care Services, Institute of Medicine. 2011 Jul 17
- Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2007 rates; fiscal year 2007 occupational mix adjustment to wage index; health care infrastructure improvement program; selection criteria of loan program for qualifying hospitals engaged in cancer-related health care and forgiveness of indebtedness; and exclusion of vendor purchases made under the competitive acquisition program (CAP) for outpatient drugs and biologicals under part B for the purpose of calculating the average sales price (ASP). Final rules and interim final rule with comment period.[Fed Regist. 2006]Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2007 rates; fiscal year 2007 occupational mix adjustment to wage index; health care infrastructure improvement program; selection criteria of loan program for qualifying hospitals engaged in cancer-related health care and forgiveness of indebtedness; and exclusion of vendor purchases made under the competitive acquisition program (CAP) for outpatient drugs and biologicals under part B for the purpose of calculating the average sales price (ASP). Final rules and interim final rule with comment period.Centers for Medicare and Medicaid Services (CMS), HHS. Fed Regist. 2006 Aug 18; 71(160):47869-8351.
- Review Variation in Health Care Spending: Target Decision Making, Not Geography[ 2013]Review Variation in Health Care Spending: Target Decision Making, Not GeographyNewhouse JP, Garber AM, Graham RP, McCoy MA, Mancher M, Kibria A, Committee on Geographic Variation in Health Care Spending and Promotion of High-Value Care, Board on Health Care Services, Institute of Medicine. 2013 Oct 1
- Geographic Adjustment in Medicare PaymentGeographic Adjustment in Medicare Payment
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