Medicare Overpays Dedicated Cancer Centers According to GAO Report

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Medicare could save $500 million annually if it removed the exemption from the prospective payment system for 11 dedicated cancer centers, according to a GAO report.  The list of facilities includes Fox Chase Cancer Center here in Philadelphia and Memorial Sloan Kettering Cancer Center in New York, among others.

The cancer centers receive payments based on their actual costs rather than the standard payment authorized by Medicare for hospitals. In 2012, payments for inpatient and outpatient treatments were approximately 40 percent higher in dedicated cancer centers for the same patient in the same geography.

The GAO found that these facilities had little incentive to pursue cost savings under the current system. It also questioned whether the additional payments were justified by the sickness of their patients. The inpatients treated in the cancer centers and paid for by Medicare had an average risk score of 2.6 in 2012 compared to 2.5 at teaching hospitals without cancer centers and 2.4 at teaching hospitals with comprehensive cancer centers. Outpatient beneficiaries had a risk score of 2.2 at the dedicated cancer centers compared to risk scores of 2.0 and 1.9 at the other facilities.

The total economic burden of cancer treatment in the United States is substantial. The cost of cancer care is expected to be $172.8 billion in 2020, a 39% increase in costs from 2010 according to a National Cancer Institute study.

One way that CMS is attempting to address the issue is by testing a new payment model called the Oncology Care Model developed by the CMS Innovation Center. Beginning in the spring of 2016, CMS will conduct a 5 year test with solo practitioners and oncology practices to determine whether a payment model that is based on episode and performance payments can provide better care with cost savings.

In a similar vein, President Obama will announce today an initiative to link health care payments to quality rather than the quantity of service performed. The administration’s goal is to have 30 percent of payments tied to quality and value.

There’s no indication that the costs reported by the dedicated cancer centers are fraudulent. But if they are intentionally inflating costs for Medicare patients, it would be in violation of the False Claims Act.

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