U.S. aims to cut Medicare with standard outpatient fees


WASHINGTON -- In a new effort to rein in soaring Medicare costs, the Bush administration has devised a plan to pay hospitals standard fees for outpatient services as routine as X-rays and laboratory tests and as elaborate as chemotherapy and surgery.

Since the government put similar controls on payments for in-hospital care in 1983, doctors have shifted many services to hospitals' outpatient clinics, which are not covered by the controls.

From 1985 to 1990, Medicare spending for outpatient services grew three times as fast as spending for patients admitted to hospitals.

Under a proposal described in a recent report to Congress, outpatient services would be subject to the same type of price controls as is inpatient care: The government would make a flat payment for all services that a Medicare beneficiary normally receives in a single visit for a particular illness or injury.

The proposal has an excellent chance of approval because Congress itself directed the secretary of health and human services to design such a plan. Medicare pays for health care for 34 million elderly and disabled people.

Adoption of such a payment plan could ultimately affect a much wider spectrum of patients. Medicaid, the federal-state program for the poor, and private insurers, including Blue Cross and Blue Shield, may eventually follow Medicare's example.

Under the plan, thousands of tests and procedures performed in hospital outpatient clinics, laboratories and emergency rooms would be classified in 297 categories, and the government would pay a standard amount for each category. Such procedures would include everything from routine blood chemistry tests to trauma care and cataract surgery.

Hospitals could keep the difference if they provided services for less than the payment they received from Medicare. They would lose money if their costs were higher.

After Medicare put similar limits on inpatient care, the number of hospital admissions declined and the average length of stay dropped sharply, but outpatient services surged.

Medicare payments for hospital outpatient care jumped to $8.4 billion in 1990 from $3.9 billion in 1985, an increase of 17 percent a year.

"It's like pushing on a balloon," said Representative Pete Stark, D-Calif., who is chairman of the House Ways and Means Subcommittee on Health. "We squeezed one end of the balloon, and the other end popped up."

Medicare classifies inpatients in 490 "diagnosis-related groups" and pays a flat amount for each patient, depending on the diagnosis.

The new plan would extend this concept to outpatients, bundling medical tests and services into 297 "ambulatory-patient groups."

The payment for a patient with pneumonia, for example, would cover the cost of a chest X-ray, a medical examination and simple laboratory tests usually performed when people with lung problems go to the outpatient department of a hospital.

There would be an extra payment if a doctor ordered an expensive diagnostic scan or inserted a plastic tube into the patient's lungs to get further information.

For outpatients with pneumonia, such procedures are now rare.

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