Elimination of Formula-Driven Overpayment
October 1, 1997 less than 1 minute read
Elimination of Formula-Driven Overpayment
Under current law, so-called formula-driven overpayments often result for hospital outpatient services due to an anomaly in the way copayments are computed and applied. Currently, hospitals are paid based on 80% of a blended amount composed of a cost portion, a charge portion, and a fee schedule portion, net of beneficiary cost-sharing. The beneficiary coinsurance is based on 20% of the hospital’s submitted charges instead of the blend on which basis Medicare pays. As such, the coinsurance does not equal 20% of Medicare’s payment and does not result in a dollar-for-dollar decrease in Medicare payments.
For services furnished commencing in FFY 1998, the current blended payment method for hospital ambulatory surgery, outpatient radiology, and other diagnostic services will be revised to lower Medicare payments for covered services. Medicare’s payments will equal the blended amount less any amount the hospital may charge the beneficiary as coinsurance.
from McDermott, Will, and Emery. Health Law Update. Washington, DC.
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