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RevCycle Intelligence: Hospital Cost-Shifting Increases Private Payer Payments by 1.6%

Healthcare organizations that faced Medicare reimbursement reductions under the Affordable Care Act engaged in hospital cost-shifting that resulted in 1.6 percent higher average payments from private payers, a new working paper from the National Bureau of Economic Research uncovered.

Researchers reported that hospitals penalized under the Hospital Readmission Reduction Program (HRRP) and the Hospital Value-Based Payment (HVBP) program earned $165 more for the average acute care claim by shifting costs to private payers.

The increased revenue from cost-shifting equated to an increase of about $86,500 in private payer reimbursements for hospitals facing an average penalty of nearly $153,000, the data from the Health Care Cost Institute (HCCI) revealed.

"This analysis shows very clear evidence of cost-shifting and demonstrates the unintended consequences of large cost-containment policies," stated study author Eric Barrette, PhD, Director of Research at the HHCI. "At a high level, the perception of cost-shifting has existed for a long time, but the evidence of it actually happening has been mixed. The complexity of the hospital market, the difficulty of measuring private payments, and diversity in how hospitals respond to cuts in public payment make cost-shifting analyses very difficult."

Without sufficient data, researchers were split on if hospitals engaged in cost-shifting behaviors. For example, a 2006 study of California hospitals showed that cost-shifting resulted in 12.3 percent of the total boost in private payer reimbursements between 1997 and 2001. The findings mirrored results from similar studies conducted in 2003 and 2000. 

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