Evidence of Strategic Behavior in Medicare Claims Reporting

Hamsa Bastani, Joel Goh, Mohsen Bayati
2015 Social Science Research Network  
Recent Medicare legislation has been directed at improving patient care quality by financially penalizing providers for hospital-acquired infections (HAIs). However, Medicare cannot directly monitor HAI rates, and instead relies on providers accurately self-reporting HAIs in claims data to correctly assess penalties. Consequently, the incentives for providers to improve service quality may disappear if providers upcode, i.e. mis-report HAIs (possibly unintentionally) in a manner that increases
more » ... eimbursement or avoids financial penalties. Identifying upcoding in claims data is challenging due to unobservable confounders such as patient risk. Our approach leverages state-level variations in adverse event reporting regulations and instrumental variable techniques to discover contradictions in HAI and present-on-admission (POA) infection reporting rates that are strongly suggestive of upcoding. We conservatively estimate that over 10,000 out of nearly 60,000 annual reimbursed claims for POA infections (18.5%) were upcoded HAIs, resulting in an added cost burden of $200 million to Medicare. Our findings suggest that self-reported quality metrics are unreliable and thus, recent legislation may result in unintended consequences. In particular, contrary to widely-held beliefs, increasing financial penalties may not reduce HAI incidence and may even exacerbate the problem. We make several policy recommendations based on our results, including a new measure for targeted HAI auditing and suggestions for effective adverse event reporting systems.
doi:10.2139/ssrn.2630454 fatcat:lfzr4v5scjgl7eu6z7xons4urq