Math gaffe resulted in $133M Medicare overpayment in Massachusetts

Dive Brief:

  • The 19-bed Nantucket Cottage Hospital, owned by Partners, miscalculated physician wages in 2011 when submitting its data to Medicare, which affected its 2015 Medicare payment schedule.
  • Under the Inpatient Prospective Payment System, Medicare must reimburse hospitals at least as much as it does rural hospitals, and Nantucket Cottage Hospital set the baseline for reimbursement in the state. Sen. John Kerry included a provision in the ACA requiring the rural wage index to be budget-neutral nationally, Axios reported. Thus, some hospitals would not get as much money as they could under this provision.
  • As a result, Medicare overpaid the hospital in 2015 about $156,000 and 55 other Massachusetts hospitals about $133.6 million, HHS' Office of Inspector General estimated in a new report.

Dive Insight:

In May 2016, the math gaffe was reported to possibly have a downstream affect of 2,000 layoffs occurring in its wake. While OIG's report didn't go far into the downstream affects, it did find the "overpayments to Massachusetts hospitals caused underpayments to hospitals in other states." 

The $133 million was beyond an August 2016 estimate of $110 million the miscalculation was going to cost the state. At that time, Rhode Island hospitals were expected to lose $7 million in funding because their reimbursement rates are tied to Massachusetts’ data.

HHS OIG found in 2011 the hospital overstated wages and wage-related costs by $232,365 and understated hours by 18,060, by:

  • Overstating wage-related costs by $434,907; 
  • Understating home office wages by $290,435; 
  • Overstating salaries by $26,973; and  
  • Overstating contract labor wages by $60,920. 

The report comes at a time when Massachusetts Gov. Charlie Baker is attempting to tamp down costs relating to MassHealth, the state's Medicaid program.

While the ACA is very much still in effect, if it is repealed in its entirety, the erasure of the Kerry provision would likely be welcomed by hospitals.

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Filed Under: Payer Hospital Administration
Top image credit: Pictures of Money