Geographic Adjustment Factors in Medicare Payment

Type: Consensus Study
Topics: Health Care Workforce, Health Services, Coverage, and Access
Board: Board on Health Care Services

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Activity Description

In order to ensure that doctors and hospitals receive reasonable payment for their services, Medicare uses geographic adjustment factors—changes in reimbursement based on estimated operating expenses in different regions across the country. However, it is uncertain whether tying payment to geographic location impacts access to and quality of care. Some providers believe geographic adjustment factors are the best tool available to ensure that they receive fair payment for treating Medicare patients. Others argue that this approach does not result in fair pay for everyone and could cause reduced access to care or potentially poorer health outcomes for patients.

The Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS) asked the IOM to evaluate the accuracy of the geographic adjustment factors used for Medicare payment. An IOM committee will prepare two reports for Congress and the Secretary of the Department of Health and Human Services over the course of 24 months. The first report evaluates the accuracy of geographic adjustment factors and the methodology and data used to calculate them. The second report, expected in spring 2012, will evaluate the effects of the adjustment factors on the distribution of the health care workforce, quality of care, population health, and the ability to provide efficient, high-value care. 

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