Editorial: Inpatient/outpatient definitions create perverse incentives

Published Jul 31, 2013 at 05:00AM

If you spend four nights in an inpatient unit at a major hospital, you probably think you’re an inpatient. But bizarre Medicare rules say otherwise in some cases.

By redefining what it means to be an inpatient, the rules shift costs to patients, their private gap insurance and to hospitals. Plus, patients can lose all coverage for follow-up nursing home or rehabilitation services after hospital discharge.

As a Boston Globe report published in Sunday’s Bulletin reveals, such gimmicks are behind what we thought was good news: the slowdown in the growth of government spending on Medicare.

This effort to use market incentives to curb Medicare costs employs for-profit vendors who get paid only if they overturn a medical decision, according to the Globe report. So much for any effort at reasonable, balanced evaluation. Doctors and hospitals are on the defensive right from the start, and many have responded by classifying patients as outpatients to avoid penalties.

The response varies dramatically from hospital to hospital, according to a report this week from the Department of Health and Human Services Inspector General, as reported by Kaiser Health News. The same symptoms and treatment at Hospital A lead to an inpatient designation, while at Hospital B the label is outpatient.

The problem of incentives and cost-shifting are at the heart of efforts to curb health care costs, both at the national and state levels. When Gov. John Kitzhaber in June asked the Oregon Health Policy Board to propose legislation on health care goals, his first listed priority was “strategies to mitigate cost shifting, decrease health insurance premiums and increase overall transparency and accountability.”

Transparency is critical if patients are to make intelligent choices. When regulators redefine the common understanding of things like inpatient status, they obscure the issues and confuse patients.

Worse, when they create financial incentives for for-profit companies to find fault in medical decisions even when there is none, they’ve just replaced one set of bad incentives with a more damaging one.

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