Medicare pays transplant hospitals for the cost of removing and shipping a donor organ, but federal law limits that reimbursement to organs that are actually used in a transplant covered by Medicare. A federal watchdog just found that limit wasn’t enforced for six years running. The Department of Health and Human Services Office of Inspector General estimates Medicare paid roughly $380 million between 2017 and 2022 for organs that were surgically acquired on Medicare’s dollar but never ended up inside a Medicare patient.
How Medicare Pays for a Transplant Organ
When a transplant hospital, known in Medicare rules as a Certified Transplant Center, removes a donor organ, it can bill Medicare for the “acquisition cost” of that organ: surgical time, transportation, tissue typing, and related expenses. Medicare reimbursed CTCs more than $3 billion for the acquisition costs of about 39,000 organs in 2023 alone. The catch, spelled out in federal statute, is that Medicare is only supposed to share in the cost of organs that get transplanted into a Medicare enrollee.
Medicare’s own guidance to hospitals doesn’t work that way. It assumes that any organ a CTC removes and hands off, to an organ procurement organization or another transplant center, will eventually go to a Medicare patient. The Office of Inspector General’s audit found that assumption is often wrong, and that the gap between what the guidance allows and what the law actually permits is where the money leaked out.
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What a 180-Organ Sample Turned Up
Auditors pulled a sample of 180 organs that hospitals had reported as “Medicare usable” and checked what actually happened to each one. Of those 180, Medicare had reimbursed hospitals for 43 organs that ended up in transplants for patients who weren’t Medicare enrollees, plus 12 organs that were never transplanted into anyone at all. Under the federal statute, none of those 55 organs should have triggered a Medicare payment. Projected across the full six-year audit window, the OIG’s full report puts the total at $379,895,793, the figure rounded to “about $380 million” in the audit’s own summary.
That jump from a 180-organ sample to a nine-figure national estimate is standard practice in this kind of financial audit: OIG checks a statistically valid sample of transplant-center cost reports, calculates the error rate it finds, and applies that rate to the full universe of organs reported as Medicare usable across the 2017-2022 period. The sample was drawn from a pool of 215 cost reports filed by 122 transplant centers nationwide, covering 20,135 organs those centers reported as Medicare usable, on which Medicare paid out $1,406,040,094 of a possible $1,497,205,683 in allocated acquisition costs. Because the estimate rests on a sample rather than a full count, OIG’s own math carries a wide margin: the $379.9 million figure is a midpoint inside a 90-percent confidence range running from $220.4 million to $539.4 million, meaning auditors are confident the true six-year cost falls somewhere across that roughly $319 million band, not that $380 million is exact to the dollar.
Where the 55 Organs Actually Went
The 55 organs split into two distinct problems. Forty-three had already been sent to another transplant center or an organ procurement organization and were then transplanted into someone Medicare didn’t cover: 42 of those went to non-Medicare patients elsewhere, generating $2,460,116 in reimbursement to the centers that gave them up, and all 12 of the transplant centers in OIG’s sample had at least one organ fall into that category. The 43rd case was different. A hospital transplanted the organ itself into a patient who did have Medicare, but only as secondary insurance, then billed just the primary insurer and never sent Medicare a claim at all, a step Medicare’s own rules require before it will share in the acquisition cost. That single organ still added $105,602 to the total; the hospital told auditors staff turnover was the only explanation it could offer for the missed billing. The remaining 12 organs never reached a transplant recipient at all: four transplant centers had reported organs, tied to deceased donors and handed off for surgical removal by an organ procurement organization, that the receiving organization instead used for research, discarded, or never actually removed. Those 12 organs, spread across the four centers, accounted for $282,137 of the $2.85 million in reimbursement tied to the audit’s 180-organ sample.
A Conflict Baked Into the Government’s Own Instructions
The report is careful to note this wasn’t described as fraud by the hospitals involved. Transplant centers were largely following the guidance CMS gave them, guidance that never matched the underlying law limiting Medicare’s share to organs Medicare enrollees actually received. OIG recommended CMS rewrite that guidance so hospitals only count and report organs transplanted into Medicare enrollees as Medicare usable, which OIG estimates could have saved the full $379.9 million. According to the report highlights, CMS did not clearly agree or disagree with that recommendation.
The mismatch didn’t start recently. Medicare’s presumption that a transplanted organ likely belonged to one of its own enrollees dates to 1972, when Congress added the end-stage renal disease benefit; as transplant coverage later expanded to hearts, lungs, livers, and other organs, the same presumption carried over even after it stopped reliably holding true. CMS itself acknowledged the gap in proposed rulemaking published in May 2021, writing that its own guidance requires transplant centers to presume an organ sent elsewhere will reach a Medicare patient “even if they are not.” CMS proposed requiring centers to count only organs actually transplanted into Medicare enrollees, then didn’t finalize it, backing off after public comments raised concerns, including from children’s hospitals, about the revenue some providers stood to lose.
The $154,210 Two Hospitals Couldn’t Document
Separate from the guidance conflict, auditors found two transplant centers that could not produce any paperwork to support five organs they had reported as Medicare usable, totaling $154,210 in payments the audit calls flatly unallowable. On that narrower finding, CMS did concur, and OIG recommended CMS direct the relevant Medicare Administrative Contractor to claw the money back from those two centers. OIG’s report doesn’t name the two centers involved; the finding is reported only as an aggregate dollar figure tied to five organs.
Where the Fix Stands Now
Both recommendations are still listed as open and unimplemented, with CMS’s next update due February 28, 2027. Until CMS revises its guidance, the same statutory gap the audit describes remains open, and nothing in the report suggests a Medicare enrollee’s own premium or coverage changes because of it. What it does show is how far $380 million can travel inside Medicare’s own accounting before anyone outside the program notices, and how long a guidance-versus-statute conflict can sit unresolved even after auditors put a dollar figure on it.
Where the help is written down
The programs that lower Medicare costs each run on a different form and a different office, and no single notice lists them together.
The Medicare Cost & Coverage Protection Kit includes a 10-page kit, 51 state Medicare cost-help packs and the new Part D out-of-pocket cap.
See the state cost-help packs in The Medicare Cost & Coverage Protection Kit.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
