Hospital billing practices won billions in extra payments, study finds
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Hospitals received billions of dollars in extra payments from insurers and government programs over a nine-year period by billing for higher-intensity care than what would be expected, according to a new study.
Why it matters: The findings argue for reconfiguring hospital payments that now are based on diagnosis and encourage organizations to game the system, according to the RAND study published in Health Affairs.
Catch up quick: Medicare pays hospitals for patient stays based on the main diagnosis that brought a person into the hospital. Many private health insurance payers have adopted similar payment systems.
- Medicare's current system, in place since 2007, gives hospitals higher payments for more patients with more complications and co-existing conditions. That gives hospitals an incentive to document patient cases at the highest level of complexity — a practice referred to as "upcoding."
What they found: Hospital discharge documentation shows that patients needing the highest-intensity level of care increased by 41% between 2011 and 2019, the study found.
- But researchers estimated that figure should have increased by 13% over the time period.
- An increase in upcoding led to $14.6 billion in hospital payments in 2019, relative to 2011 coding practices, the study said. That included $5.8 billion from private health plans, $4.6 billion from Medicare and $1.8 billion from Medicaid.
- The study examined data from Florida, Kentucky, New York, Washington and Wisconsin, which represented about 20% of hospital discharges across the country. The data set included patient discharges across all health care payers.
What they're saying: Upcoding is "adding to the cost of health care overall, which is, in some ways, always going to trickle down to ... higher out-of-pocket payments for health plan premiums in private markets, as well as putting a burden on taxpayers for Medicare," said Daniel Crespin, lead author of the study and an economist at RAND.
Between the lines: More research is needed to understand what proportion of upcoding actually makes payment to hospitals more accurate, and what proportion is fraud, the study said.
The other side: The American Hospital Association told Axios it's still reviewing the study but said several trends over time have likely contributed to higher-intensity discharges.
- Less complex medical care has increasingly moved away from of inpatient settings, said Aaron Wesolowski, vice president of research strategy and policy communications at the AHA.
- "It is also important to highlight that this study includes limited data from just five states, making it hard to draw any larger conclusions," he said.
- The Federation of American Hospitals told Axios it believes the study is deeply flawed and shouldn't inform policy decisions.
