Tenet’s Outlier Medicare Fees Put It in Unwelcome Spotlight

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MEDICARE CODING AND BILLING policies at Tenet Healthcare Corporation have come under scrutiny by both Medicare officials and Wall Street analysts.

Attention is centered around how Tenet aggressively pursued Medicare reimbursement under “outlier” formulas. These formulas are designed to supplement DRG reimbursement when a hospital treats patients with particularly complex health problems.

Huge Jump In Outlier $s

In 2000, Medicare paid Tenet $351 million in outlier payments. This figure increased to $763 million in fiscal 2002, an increase of $451 million, or 117%, in 24 months!

Comparisons with other hospitals reveal the scale of Tenet’s Medicare billing strategy. For fiscal 2002, 23.5% of Tenet’s Medicare reimbursement came from outlier payments. At HCA, it was only 5% and 4.5% for all hospitals.

One technique Tenet used to boost its outlier reimbursement was to aggressively raise its chargemaster prices each year. Although government and private payers don’t pay chargemaster rates, it is chargemaster prices which are used in complex pricing formulas that trigger supplemental payments from Medicare, Medicaid, and other payers.

Federal auditors are now scrutinizing Tenet. Since news of this crisis became public, Tenet’s share price has declined 73% from its 52-week high of $52.50 on October third.

THE DARK REPORT observes that Tenet’s problems demonstrate that any attempt to “game” the Medicare reimbursement system eventually attracts attention. The Wall Street Journal said that “Tenet reaped rewards by triggering a hidden jackpot in the Medicare system.”

Expect this to remain a major story. In California, FBI agents raided Tenet’s Redding Medical Center and the offices of two cardiologists accused of performing unnecessary surgeries. Medicare’s top administrator, Tom Scully, has said that fixing the outlier loophole is “now number one on my list of things to do.”

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