Unnecessary Medicare Treatment Costs Put at $2 Billion

The federal government spends about $2 billion a year on unnecessary hospital care for Medicare patients, and back problems, diabetes and upper respiratory infections are among the most common sources of questionable admissions, according to a special investigation by the Health and Human Services Department.

More than three-fourths of the mishandled patients did need medical care but “would have been treated more appropriately in outpatient settings,” said the report by Richard P. Kusserow, the department’s inspector general.

Among the other patients, some belonged in nursing homes and some did not need any acute care at all, the study alleged. A copy of the study was obtained by The Times.

The department had previously disclosed its estimate that 10% of Medicare patients should not have been hospitalized, but this latest study provided the first details on the cost and composition of incorrect admissions.

Unnecessary Admissions

About 6 million of the nation’s 28 million Medicare beneficiaries--those over 65 and the disabled of all ages--are likely to be hospitalized at some time this year. If the department estimate is correct, about 600,000 of those people should not enter the hospital. The study suggests that these patients could be better treated elsewhere, whether in a doctor’s office, a hospital outpatient clinic, in a nursing home or in their own homes.

The highest rates of unnecessary admissions, the study said, were for back problems, diabetes, upper-respiratory tract infections, bone cancer and digestive disorders. The survey covered a random sample of 7,000 Medicare discharges in 1984 and 1985, selected to represent the entire range of Medicare hospital patients.

Cataract surgery also was listed as a frequently unnecessary hospital admission. However, since 1985, most such surgeries have been shifted outside the hospital and now are performed in outpatient centers.

Medicare paid hospitals $2 billion in fiscal 1985 for unnecessary admissions, the study said. The cost of properly treating these patients “in other medical settings” outside the hospital would have been an estimated $939 million, the study said. If the estimate is correct, the patients could have been correctly cared for, and Medicare would have saved more than $1 billion.

Records Examined

The inspector general’s study was based on a detailed examination of hospital records for discharged patients. The decision to admit a patient to a hospital is made by a physician. Doctors contend that these are difficult decisions based on judgment, experience and the particular problems of individual patients.

For example, an elderly patient with chest pains and shortness of breath might be on the verge of suffering a heart attack. Or he might have indigestion from a spicy meal. A doctor might order the patient admitted to a hospital. If there is no serious problem, the case could later be classified as an unnecessary admission.

The inspector general’s study is sure to increase the already high level of tension between the medical profession and the federal Medicare system. In efforts to hold down costs, Congress installed in 1983 a prospective payment system for hospitals. Illnesses are grouped in diagnostic categories, and a hospital receives a fixed fee for each category.

Pocketing the Profit

If the hospital can treat and discharge the patient for less than the federal allowance, it can pocket the profit. If the treatment exceeds the fee, the hospital suffers the loss.

The fee system imposes cost-cutting pressures on both doctors and hospitals. The latest inspector general survey, which identifies frequently incorrect categories of admissions, will increase the pressures to save money.

Smaller hospitals, those with fewer than 100 beds, are most likely to have unnecessary admissions, the study said.

Local organizations hired by Medicare to oversee the quality of care should conduct an “intensified” review of procedures at hospitals where there is a significant number of incorrect admissions, the report said. Action to reduce “unnecessary admissions to hospitals is one of the most effective ways of saving Medicare dollars,” the report said.