Medicare to Alter How It Pays Hospitals for Difficult Cases

The U.S. Centers for Medicare and Medicaid Services said Thursday that it will change the way it reimburses hospitals for the most complicated and expensive medical cases.

The revised rules are aimed at companies such as Santa Barbara-based Tenet Healthcare Corp., the nation’s second-largest hospital chain, which reaped huge profit from such cases and now is the subject of several federal probes. Tenet has repeatedly denied breaking any laws.

The new regulations target inflated billing practices and will eliminate as much as $2 billion a year in excessive payments, the agency said.

The rules are a response to what the government calls abuse of a system that allows hospitals to collect increased Medicare reimbursements, called outliers, once a medical case crosses a certain cost threshold; the bigger the bill, the higher the reimbursement.

Tenet recently stopped billing Medicare for the controversial fees, but the government said the Medicare program still pays $3 million a day to hospitals that have inflated their bills.

Under the new rules, set to take effect in October, the government would review hospitals’ costs and demand that they repay excessive fees. Hospitals with histories of inappropriate billing would not be paid until the cases were reviewed.