21 states take aim at MA hospitals' Medicare windfall

Under an arcane hospital payment system, Nantucket Cottage's rural designation has allowed the state's 81 other hospitals to collectively reap between a $256.6 million and $367 million annual bonus for the last two years—at the expense of other states. An Institute of Medicine report released in July referred politely to the bonanza as the "Nantucket effect." Now a coalition of 21 states is seeking to reverse the windfall, calling it the "Bay State boondoggle," the product of "Yankee ingenuity"—the artful manipulation of obscure payment formulas. "The entire way the payment system is now calculated has become so complex and so susceptible to gaming and manipulation that you'd play the game yourself if you were running a hospital, to make sure your reimbursements continue to go up," said Dr. Donald Berwick, President Obama's former administrator of the Centers for Medicare and Medicaid Services and a health policy lecturer at Harvard Medical School.