MEDICARE / CUTTING COSTS : 4 to 6 Hospitals to Be Chosen for Discount Bypass Surgery


In a discount-pricing experiment, Medicare will attempt to save millions of dollars by giving a government seal of approval this fall to a handful of hospitals doing cardiac artery bypass surgery, one of the most common operations for Americans over 65.

The four to six institutions endowed with the label “Medicare participating heart bypass center” will charge a set price for all charges associated with the surgery, which currently costs taxpayers $2 billion a year. Medicare expects an average savings of 10% on each operation, which now costs between $15,000 and $20,000.

SPIRALING COSTS: If the three-year demonstration project works, Medicare officials hope to adopt the discount pricing system for cataract surgeries and other common procedures. They hope it will provide one answer in the government’s quest to control Medicare spending, which this year hit $96 billion and is climbing at twice the rate of inflation.

Gail Wilensky, head of federal Health Care Financing, would like Medicare to emulate private business, which is actively negotiating package discount medical contracts.


“Being able to label yourself a government demonstration center is invoking an implied government seal of approval,” Wilensky said in a recent interview. “The intent is to direct volume to these (selected) places.”

The 125,000 bypass operations performed in 1988 represented a 60% increase in just two years.

If less invasive treatments don’t work, Medicare will pay for bypass surgery, in which veins from elsewhere in the body are used to replace clogged veins to the heart.

PATIENT PAYS LESS: Medicare’s experiment also offers a financial benefit to the patient. It will continue the Medicare practice of paying 80% of the “general and customary” fee, with the beneficiary paying 20%. However, patients are currently responsible for any charges above the customary fee--a practice known as “balanced billing.”

At the hospitals selected for the experiment, there will be no extra charges because participating doctors will agree to accept Medicare fees as full payment.

Wilensky predicted that the selected hospitals will become regional magnets, drawing patients from a wide geographic area and possibly even offering free transportation for the patient and a spouse.

THE FINALISTS: Medicare will choose four to six hospitals from a list of 10 finalists: the Cleveland Clinic Foundation; St. Joseph’s Hospital of Atlanta; Emory University Hospital, Atlanta; Methodist Hospital of Indiana, Indianapolis; The University Hospital, Boston; New England Medical Center, Boston; St. Joseph Mercy Hospital, Ann Arbor, Mich.; Ohio State University Hospital, Columbus; St. Vincent Hospital and Medical Center, Portland; and St. Luke’s Episcopal Hospital, Houston.

The Cleveland Clinic already does more cardiac bypass surgeries on Medicare patients than any other hospital--868 in 1988. Hospitals that win the Medicare contract expect to increase their volume of operations up to 5%.


All 10 hospital finalists already enjoy good reputations as major centers for cardiac bypass surgery.

Medicare originally sent letters of invitation to all 744 hospitals that performed cardiac bypass surgery in 1988. Some 206 responded, and Medicare reviewers picked 42 high-volume centers for invitation to submit a final, highly detailed application. The final list of 10 was selected by a review panel of medical experts.

Patients are still free to have bypass surgery in any Medicare-eligible hospital. “We do not restrict the beneficiaries from choosing, and there is no penalty for not picking one of these (specially selected hospitals),” Wilensky said.