The statement of task directed the committee to make recommendations to improve the accuracy of fee-for-service Medicare payments by assessing the data sources and methods used in making geographic adjustments. It also directed the committee to consider the impact on stakeholders of any recommendations that would change the current system.

The committee’s membership includes individuals with a broad range of experience, including those with expertise regarding the Medicare program, including the hospital wage index (HWI) and the geographic practice cost indexes (GPCIs), health care financing and management, hospital administration, health care systems in metropolitan and nonmetropolitan areas (MSAs and non-MSAs), and the health care workforce. By discipline, the perspectives of the committee members include economics, epidemiology, health services research, medicine, nursing, political science, and statistics. In developing principles about accuracy, consistency, fairness, and transparency, they drew from an even broader range of fields of experience, including business administration, management science, mathematics, psychology, regulatory theory, and others.

At its first meeting in September 2010, the committee held a public session and heard testimony from members of the U.S. Congress, CMS (the government sponsor), the health care industry, and other stakeholders. The public session made it clear that people had a variety of strong opinions about how the study should be conducted and what the committee should recommend. Notwithstanding their differences, one area of agreement among stakeholders was the need to rebuild the system and to improve the accuracy of the data sources and methods used in making geographic adjustments to Medicare provider payments.

The committee worked to ensure that its recommendations in its phase 1 report were based on the best available data and evidence. Although improving consistency in the data sources and methods was a unifying principle, the committee also recognized the critical need to examine the impact on stakeholders of redistributing funds if it recommended changes in these areas. Throughout their deliberations, committee members also recognized that even the most accurate adjustment factors will not address problems associated with the current fee-for-service payment system such as access to care, excess utilization, and appropriateness of the provider mix.

Within this broader context, the committee began its work by focusing on the technical accuracy of the adjusters, with accuracy defined as the degree of closeness of measurement to the true value of whatever is being measured. The approach that the committee used first involved an assessment of the accuracy of the data sources and methods that are currently used by CMS. Next, the committee compared the data sources and methods that are currently used with other sources and methods that have been suggested by experts and researchers, including members of the committee. Finally, the committee reviewed a series of simulations to assess the potential effects of several alternatives.

In keeping with the committee’s charge, the phase 2 report will consider separate policy adjustments and their impact on the health care workforce, including occupational mix, provider shortages, and the ability to provide high-value, high-quality care in all geographic areas.


Within its conceptual framework, the committee adhered to the unifying principle of improving the accuracy of payments to hospitals and other providers on the basis of the input prices (e.g., prevailing employee wages) that providers face. The committee recognized, how-

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