IOM Issues Report on Geographic Adjustment in Medicare Payments - June 7, 2011

On June 1, the Institute of Medicine (IOM) released a report analyzing the Medicare methodology for geographic adjustments to fee-for-service payments to hospitals, physicians and other clinical practitioners. Medicare makes adjustments in fee-for-service payments by geographic region to reflect differences in health care costs around the country. Pursuant to the Affordable Care Act, Congress and the U.S. Department of Health and Human Services requested a report from the IOM to analyze and improve the accuracy of such adjustments. The IOM report makes a number of recommendations, including moving to a single source of wage and benefit data, changing to one set of payment areas and labor markets, expanding the types of occupations included in the index calculations, developing a new source of data to calculate the cost of office rent and applying the hospital wage index for non-acute-care hospital facilities.