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OIG Calls for More Scrutiny of Medicare Hospital Outlier Payments

Cheryl Clark, for HealthLeaders Media, November 15, 2013

The OIG's list of 158 hospitals and their share of outlier payments to total Medicare payments was referenced, but not included in the OIG's report. The list was released separately, in response to a request under the Freedom of Information Act.


View the OIG list


Outlier payments are set up to compensate hospitals beyond set payment amounts for certain diagnostic categories of patients because some patients are more difficult cases, "involving extraordinary high costs," the report says. Outlier payments are intended to "protect hospitals from large financial losses because of unusually expensive cases."

The OIG report raises new questions about the wide variation of hospital charges as laid out last May when the Centers for Medicare & Medicaid Services released its controversial "Chargemaster" for the 100 most common diagnostic reasons for an inpatient stay.

How much each hospital is paid under the outlier payment system is heavily influenced not by a hospital's costs of caring for that patient, but by the "sticker price," or what it chooses to charge.

The agency's investigation also revealed other peculiar findings. Of the 158 hospitals with the highest outlier payments, 48 or 30% are in California, which has just 12% of the nation's hospitals paid under the DRG system. Jan Emerson-Shea, spokeswoman for the California Hospital Association, said her organization had not had time to review the report and could not respond.

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