Earlier this week the Institute of Medicine of the National Academies (IOM) issued a new consensus committee report, “Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy.” The report, which was sponsored by the Centers for Medicare & Medicaid Services (CMS), examined Medicare’s practice of adjusting fee-for-service payments to hospitals, physicians, and other clinical practitioners according to the geographic locations in which they practice.
According to a National Academies press release, almost 40 percent of hospitals have been granted exceptions to how their adjustments are calculated, which suggests that the mechanisms underlying the adjustments are inadequate. Recommendations in the IOM report include: moving to a single source of wage and benefits data; changing to one set of payment areas and labor markets; and expanding the range of occupations included in the index calculations.
The report is the first of three to be issued by the committee. A supplemental report that discusses physician payment issues further will be issued this summer. A final report to be released in 2012 will present the committee’s evaluation of the effects of the adjustment factors on health care quality, population health, and the distribution of the health care work force.