Heart hospitals, medicare, and cross-subsidization

Area of Science:

• Health economics
• Hospital administration
• Medicare policy

Background:

• Medicare reimbursement disparities between heart hospitals (HHs) and traditional hospitals (THs) are not well understood.
• Investigating potential differences in Medicare payments could inform policy adjustments.

Purpose of the Study:

• To compare Medicare reimbursement rates between HHs and THs for various invasive cardiac and non-cardiac procedures.
• To identify potential policy implications of observed reimbursement differences.

Main Methods:

• Utilized Diagnosis Related Group (DRG)-specific data from Hospital Compare.
• Analyzed Medicare reimbursement for hospitals in nine markets with HHs, representing 10% of the national HH market.

Main Results:

• THs received significantly higher Medicare reimbursement than HHs for coronary artery bypass graft (CABG), percutaneous coronary intervention (PCI), heart valve replacement, and pacemaker implantation.
• THs also had higher reimbursement for heart failure, chronic obstructive pulmonary disease (COPD), pneumonia, and diabetes treatments compared to HHs.

Conclusions:

• The higher reimbursement for THs, particularly for non-cardiac services, suggests a potential policy to support their cross-subsidization of other hospital services.
• If Medicare reduces reimbursement for THs' cardiac services, it should consider increasing direct payments for services currently subsidized indirectly.