How Medicare Distorts Medical Care

The Wall Street Journal has been doing a series in which it digs into Medicare billing data to find interesting things about how medical providers react to the incentives in the payment system. The latest report (subscription might be required) found that patients who received care at long-term acute hospitals tend to be discharged exactly on the date that would maximize the hospital’s payments from Medicare. There were remarkably few people who were discharged the days immediately before or after the maximum reimbursement date. It’s another example of the need for major reforms in the way Medicare reimburses medical providers and sets prices in the medical industry. Until then, you need to consider a provider’s financial incentives when choosing a plan of care, if you can.

Under Medicare rules, long-term acute-care hospitals like Kindred’s typically receive smaller payments for what is considered a short stay, until a patient hits a threshold. After that threshold, payment jumps to a lump sum meant to cover the full course of long-term treatment.

That leaves a narrow window of maximum profitability in caring for patients at the nation’s about 435 long-term hospitals, which specialize in treating people with serious conditions who require prolonged care. General hospitals are paid under different rules.

A Wall Street Journal analysis found that many long-term-hospital companies discharge a disproportionate share of patients during that window when hospitals stand to make the most, a sign that financial incentives in the Medicare system may shape patient care.