Medicare Whac-A-Mole
In the wake of the two payment reforms, hospitals began to manipulate the system through “upcoding”—systematically shifting patients into higher-paying DRGs (diagnosis-related groups). Research by economists at Dartmouth University suggests that during the early 1990s, hospital administrators figured out ways to substantially increase the number of Medicare cases they billed to higher-paying DRGs. Payment games continue today. In October the Senate Finance Committee released a report accusing several large home health care companies of abusing Medicare’s payment rules by pushing employees to perform extra therapy visits, thereby qualifying for Medicare bonus payments, even when those visits weren’t strictly necessary. But for many health care providers, that’s the business. Hospital administrators “are people whose job it is to game the system,” Kling says. “They know every little detail of the rules.”
Playing by the rules, and getting the most out of them, becomes the focus. Over time, the rules cease to guide the game and instead become the purpose of the game. Activities that are coded and paid for become the activities that providers do the most. The system encourages covered procedures, such as surgeries and child delivery, while discouraging doctors from spending time in nonpaid activities such as emailing patients or monitoring health data collected electronically at home by the patient. The provision of care bends to fit the shape, however quirky, of the payment rules.
