Nav: Home

UCLA study finds inflated charges, significant variation in Medicare payment patterns

March 02, 2016

UCLA researchers found inflated charges and significant variation in patterns of payments for surgical care by the Centers for Medicare & Medicaid Services (CMS). That charges were inflated compared with payments disproportionately affects the underinsured and uninsured, who often must pay for their care out of pocket.

Surprisingly, the study found that it's not what's happening in the operating room that is driving the payment variations, but procedures that are being done in outpatient clinics.

The findings add fire to the debate over whether Medicare's dollars are being well spent. This is particularly important to address as Medicare accounts for 16 percent of the federal budget and spending is projected to increase sharply in the coming decades, said study first author Dr. Jonathan Bergman, assistant professor of urology and family ,edicine at the David Geffen School of Medicine at UCLA and the Greater Los Angeles Veterans Administration.

Researchers found that charges are inflated compared with payments, by a factor of three to one. That average payments are only a third of what Medicare charges may not affect insured individuals, but given that Medicare charges are used as a baseline by most insurance companies for their own charges, this inflation affects uninsured individuals and others who pay out of pocket.

The study appears this week in the early online edition of the peer-reviewed journal Surgery.

"More than over 60 percent of bankruptcies in the United States are medical," Bergman said. "The inflated charges we noted in our study may contribute to the burden that health care expenses levy on individuals and families."

For the study, the researchers analyzed CMS public data for 2012, specifically the Medicare Part B provider utilization and payment data. The study found that cost and variation were driven by large-scale, office-based visits and procedures that were typically low-cost, a finding that contradicts the commonly held belief that high-intensity surgical care contributes most to inflated medical costs.

"While cost of surgical care in the United States is significant, our findings show that the most meaningful contributors to cost and variation are treatments that most frequently occur in a clinician's office," Berman said. "Opportunities for improved value within surgical care are important, but perhaps the most meaningful reform can be made by targeting office-based events and procedures rather than what happens in an operating room."

In Medicare's fee-for-service program, Bergman said, higher-earning clinicians achieved high reimbursement by ordering more services for each beneficiary treated. This suggests a misalignment of incentives in fee-for-service reimbursement, a payment model where services are unbundled and paid for separately. The findings suggest a need to consider broadening alternative payment models, such as Accountable Care Organizations or systems like the Veterans Administration, where clinicians are not financially incentivized to perform more procedures on each patient.

Both the Veterans Administration and the safety net have pursued models in which physician reimbursement is separated from service billing, and outcomes at both the VA and safety net compare favorably with fee-for-service. Several policy mechanisms can be considered, including expanding bundled payments and Accountable Care Organizations, and moving away from fee-for-service payment models.

The reasons for the significant degree of variation noted aren't completely understood and warrant further investigation, but they do point to a need to consider whether the current incentive structure is ideal in the current care environment, Bergman said.

The study also noted significant variation in delivery of care by treatment location. Variation in spending and care delivery by geographic region reflects a potential misalignment of health care resources, as high use of resources is often associated with worse outcomes, suggesting the deleterious effects of certain diagnostic and treatment procedures. Reducing unwarranted variation in spending represents an important avenue for quality improvement, Bergman said, and holds promise in liberating resources that could be targeted to competing societal needs.

"We found significant variation in patterns of payments for surgical care in CMS. Improving our understanding of this variation, and implementing interventions to ensure that necessary care is delivered and unnecessary care is not, may help bridge the value gap that leaves the United States healthcare system as an outlier in cost and quality among industrialized countries," the study states.
For more than 50 years, the urology specialists at UCLA have continued to break new ground and set the standards of care for patients suffering from urological conditions. In collaboration with research scientists, UCLA's internationally renowned physicians are pioneering new, less invasive methods of delivering care that are more effective and less costly. UCLA's is one of only a handful of urology programs in the country that offer kidney and pancreas transplantation. In July of 2015, UCLA Urology was ranked third in the nation by U.S. News & World Report. For more information, visit

University of California - Los Angeles Health Sciences

Related Health Care Articles:

Large federal program aimed at providing better health care underfunds primary care
Despite a mandate to help patients make better-informed health care decisions, a ten-year research program established under the Affordable Care Act has funded a relatively small number of studies that examine primary care, the setting where the majority of patients in the US receive treatment.
International medical graduates care for Medicare patients with greater health care needs
A study by a Massachusetts General Hospital research team indicates that internal medicine physicians who are graduates of medical schools outside the US care for Medicare patients with more complex medical needs than those cared for by graduates of American medical schools.
The Lancet Global Health: Improved access to care not sufficient to improve health, as epidemic of poor quality care revealed
Of the 8.6 million deaths from conditions treatable by health care, poor-quality care is responsible for an estimated 5 million deaths per year -- more than deaths due to insufficient access to care (3.6 million) .
Under Affordable Care Act, Americans have had more preventive care for heart health
By reducing out-of-pocket costs for preventive treatment, the Affordable Care Act appears to have encouraged more people to have health screenings related to their cardiovascular health.
High-deductible health care plans curb both cost and usage, including preventive care
A team of researchers based at IUPUI has conducted the first systematic review of studies examining the relationship between high-deductible health care plans and the use of health care services.
Health insurance changes, access to care by patients' mental health status
A research letter published by JAMA Psychiatry examined access to care before the Patient Protection and Affordable Care Act (ACA) and after the ACA for patients grouped by mental health status using a scale to assess mental illness in epidemiologic studies.
Medical expenditures rise in most categories except primary care physicians and home health care
This article was published in the July/August 2017 issue of Annals of Family Medicine research journal.
Care management program reduced health care costs in Partners Pioneer ACO
Pesearchers at Partners HealthCare published a study showing that Partners Pioneer ACO not only reduces spending growth, but does this by reducing avoidable hospitalizations for patients with elevated but modifiable risks.
Health care leaders predict patients will lose under President Trump's health care plans
According to a newly released NEJM Catalyst Insights Report, health care executives and industry insiders expect patients -- more than any other stakeholder -- to be the big losers of any comprehensive health care plan from the Trump administration.
The Lancet: The weaponisation of health care: Using people's need for health care as a weapon of war over six years of Syrian conflict
Marking six years since the start of the Syrian conflict (15 March), a study in The Lancet provides new estimates for the number of medical personnel killed: 814 from March 2011 to February 2017.
More Health Care News and Health Care Current Events

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Rethinking Anger
Anger is universal and complex: it can be quiet, festering, justified, vengeful, and destructive. This hour, TED speakers explore the many sides of anger, why we need it, and who's allowed to feel it. Guests include psychologists Ryan Martin and Russell Kolts, writer Soraya Chemaly, former talk radio host Lisa Fritsch, and business professor Dan Moshavi.
Now Playing: Science for the People

#538 Nobels and Astrophysics
This week we start with this year's physics Nobel Prize awarded to Jim Peebles, Michel Mayor, and Didier Queloz and finish with a discussion of the Nobel Prizes as a way to award and highlight important science. Are they still relevant? When science breakthroughs are built on the backs of hundreds -- and sometimes thousands -- of people's hard work, how do you pick just three to highlight? Join host Rachelle Saunders and astrophysicist, author, and science communicator Ethan Siegel for their chat about astrophysics and Nobel Prizes.