Institute of Medicine recommends that Medicare adjust regional cost calculations

Medicare's methods of calculating regional costs are inaccurate and need to be redone, according to a new report from the Institute of Medicine (IOM).

Medicare needs to make "a significant change" to how it evaluates real estate costs and salaries of healthcare workers, the report said. Although those revisions would affect the finances of tens of thousands of hospitals and medical practices, the total impact is unclear.

A second IOM report, due in the spring of 2012, will examine what effect adjustment rates have on the distribution of the healthcare workforce, quality of care, population health, and the ability to provide efficient, high-value care.