Medicare Audit Reveals $400 Million Spent on Unused Organ Transplants

A federal watchdog audit has found that Medicare paid an estimated $380 million to $400 million over a six-year period for organs that were never used in Medicare-covered transplants.

This has raised questions about how the program reimburses transplant centers and whether the existing federal guidance conflicts with the law.

According to a new audit from the Department of Health and Human Services Office of Inspector General (OIG), the payments stemmed from a discrepancy between federal statutory requirements and guidance issued by the Centers for Medicare & Medicaid Services (CMS).

The audit found that Medicare reimbursed transplant centers for acquiring some organs that either were transplanted into non-Medicare patients or were never transplanted at all.

"Medicare was paying acquisition costs under guidance that effectively assumed an organ transferred through the transplant system would ultimately be used for a Medicare patient. Sometimes it wasn’t," Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.

"That’s a rules and oversight failure. CMS guidance and federal law weren’t lined up. And taxpayers were left paying the difference."

The new audit’s findings are arriving as lawmakers are already scrutinizing federal health-care spending and Medicare's long-term finances.

Organ transplantation is among the most expensive services covered by Medicare, and the program reimbursed certified transplant centers for more than $3 billion in organ acquisition costs involving about 39,000 organs in 2023 alone, according to the OIG.

The new report suggests that the current reimbursement practices may not fully comply with federal law, potentially costing taxpayers hundreds of millions of dollars.

Under federal law, Medicare is generally allowed to reimburse transplant centers only for organs used in Medicare-covered transplants.

However, the OIG said CMS guidance instructs transplant centers to treat many transferred organs as "Medicare usable organs" based on the assumption that they will eventually be used in Medicare-covered procedures. In practice, some of those organs are transplanted into patients without Medicare coverage, while others are never transplanted at all.

The audit reviewed organ acquisition reimbursements from 2017 through 2022 and concluded that CMS guidance conflicts with federal statutory requirements.

"For beneficiaries, this probably doesn’t translate into an obvious $10 charge on next month’s Medicare bill. The damage is broader," Ryan said. "Every unnecessary dollar coming out of Medicare is money that isn’t available for actual patient care, especially in a program already under enormous financial pressure."

Auditors examined a statistical sample of 180 organs reported as Medicare-usable by 12 transplant centers. Those organs were associated with roughly $12.3 million in Medicare reimbursements.

Using those findings, the watchdog estimated that Medicare paid transplant centers approximately $380 million for organs that were not ultimately used in Medicare-covered transplants during the six-year audit period.

Still, not everyone believes the level of waste is significant, even if taxpayers took on the brunt of it.

"If we spread that $380 million evenly over six years, it is only 2 percent waste. For something as precarious as organ transplant, 2 percent waste does not seem like an outlandish figure," Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek.

"Put another way, over six years $18,000,000,000 was spent on organ transplants and $17,620,000,000 was used in the manner intended. That seems reasonably efficient."

According to the OIG, federal law limits reimbursement to organs that are actually used in Medicare-covered transplants. But CMS guidance assumes that organs removed and furnished to another transplant center or organ procurement organization will eventually be used for a Medicare beneficiary.

The audit concluded that this assumption does not always end up being true and that Medicare therefore shares in the acquisition costs of some organs that do not ultimately benefit Medicare enrollees.

The OIG recommended that CMS direct Medicare administrative contractors to recover $154,210 in payments made to two transplant centers that could not provide sufficient documentation to support certain reimbursement claims.

The watchdog also urged CMS to revise Medicare guidance so that only organs actually transplanted into Medicare enrollees are counted and reported as Medicare-usable organs.