Medicare Beneficiaries Paid Nearly Half of the Costs for Outpatient Services at Critical Access Hospitals

WHY WE DID THIS STUDY

The Critical Access Hospital (CAH) certification was created to ensure that rural beneficiaries would have access to hospital services. Medicare reimburses CAHs at 101 percent of their "reasonable costs," rather than at the predetermined rates set by the Outpatient Prospective Payment System (OPPS). The system that Medicare uses to calculate outpatient coinsurance amounts for beneficiaries who receive services at CAHs differs from that used for beneficiaries who receive services at acute care hospitals. Beneficiaries who receive services at CAHs pay coinsurance amounts based on CAH charges, whereas beneficiaries who receive services at acute care hospitals pay coinsurance amounts based on OPPS rates. CAH charges are typically higher than the reasonable costs associated with CAH services or the OPPS rates that acute-care hospitals receive.

HOW WE DID THIS STUDY

We used 2009 and 2012 claims data to calculate the percentages and amounts of coinsurance that Medicare beneficiaries paid toward the costs for outpatient services at CAHs. Additionally, we calculated the percentages and amounts of coinsurance that beneficiaries would have paid at acute-care hospitals for 10 outpatient services that were frequently provided at CAHs.

WHAT WE FOUND

Because coinsurance amounts were based on charges, Medicare beneficiaries paid nearly half the costs for outpatient services at CAHs. In 2012, beneficiaries paid approximately $1.5 billion of the estimated $3.2 billion cost for CAH outpatient services. Additionally, the average percentage of costs that beneficiaries paid in coinsurance for these services increased 2 percentage points between 2009 and 2012. Finally, for 10 frequently provided outpatient services at CAHs, beneficiaries paid between 2 and 6 times the amount in coinsurance that they would have for the same services at acute-care hospitals.

WHAT WE RECOMMEND

Because coinsurance amounts were based on charges, Medicare beneficiaries paid a higher percentage of the costs in coinsurance for outpatient services received at CAHs than they would have paid at hospitals under OPPS. Further, the percentage of costs that Medicare beneficiaries paid in coinsurance for outpatient services at CAHs has increased in recent years. To reduce the percentage of costs that Medicare beneficiaries pay in coinsurance, we recommend that the Centers for Medicare & Medicaid Services (CMS) seek legislative authority to modify how coinsurance is calculated for outpatient services received at CAHs. Some ways in which CMS could modify how coinsurance is calculated for such services include (1) computing coinsurance so that it is based on interim payment rates rather than charges and (2) processing claims for outpatient services at CAHs as if they were paid under OPPS for the purpose of calculating an OPPS equivalent coinsurance. CMS responded to the report, but neither concurred nor nonconcurred with our recommendation.