Medicare paid transplant hospitals an estimated $380 million from 2017 through 2022 to acquire organs that were never transplanted into Medicare patients, because long-standing CMS guidance conflicts with a federal law barring the program from subsidizing care for people it does not cover, the HHS Office of Inspector General found. The audit, issued September 1, 2026, recommends that CMS rewrite that guidance. CMS, which proposed a fix in 2021 but dropped it after pushback from hospitals, did not say whether it agrees.
How Medicare pays for organs
Medicare reimburses the roughly 250 CMS-certified transplant hospitals for the cost of acquiring kidneys, livers, hearts, lungs, pancreases and intestines, including fees paid to organ procurement organizations, transportation, tissue typing and surgical removal. In 2023, those payments topped $3 billion for about 39,000 organs, according to the OIG audit. Spending has grown quickly, rising 160 percent from $1.27 billion in 2011 to $3.31 billion in 2023, while the number of organs rose 77 percent.
Each hospital’s Medicare share is set by a ratio: organs used for Medicare patients divided by all usable organs. The Social Security Act’s “anti-cross-subsidization” principle says Medicare should not bear costs for people it does not insure, so only organs transplanted into Medicare enrollees should count on the Medicare side of that ratio.
CMS guidance, however, tells hospitals to count any organ they send to another transplant center or procurement organization as Medicare usable, whether or not a Medicare patient receives it. OIG traced that presumption to 1972, when Medicare added its end-stage renal disease benefit and assumed most kidney recipients would be enrolled in the program. The assumption was later extended to other organs and never updated.
Program costs versus household costs. An accounting fight over transplant reimbursement will not show up on a member’s bill, but premiums, copays and drug costs will, and the 51 state Medicare cost-help packs in The Medicare Cost & Coverage Protection Kit show where each state offers help with those.
What the auditors found in 180 organs
OIG sampled 180 organs that 12 transplant hospitals had reported as Medicare usable on cost reports covering 2017 through 2022. It matched them against national transplant data from the Health Resources and Services Administration and against Medicare claims.
Of the 180, 125 were used in Medicare-covered transplants. The other 55 were not, yet Medicare paid $2.8 million toward them. Forty-three went into transplants Medicare did not pay for, most after being sent to another hospital or procurement organization, and every one of the 12 hospitals had at least one such organ. The remaining 12 were never transplanted at all: procurement organizations used them for research, discarded them or never removed them. In one case, the organization did not recover the organ because it determined the donor was not deceased, but the hospital still counted it as Medicare usable.
Projecting from the sample, OIG estimated that of the $1.4 billion Medicare paid transplant centers for organ acquisition in the cost reports it reviewed, about $379.9 million went to organs not used in Medicare-covered transplants. Because the statistical range runs from $220 million to $539 million, the $380 million figure is an estimate rather than a count.
OIG is not seeking to recover that money, because the hospitals were following CMS guidance. Separately, two hospitals could not document five organs they had counted as Medicare usable. One said it may have mistakenly reported three research kidneys; the other could not explain two extra pancreases. Those errors cost Medicare $154,210.
Why the fix stalled in 2021
CMS has acknowledged the problem. In the fiscal year 2022 inpatient hospital proposed rule, published in May 2021, the agency wrote that “through unintended consequences, Medicare currently shares in the organ acquisition costs for some organs that are not actually transplanted” into Medicare patients. It proposed requiring hospitals to count as Medicare usable only organs actually transplanted into Medicare enrollees.
CMS did not finalize that change. In the December 2021 final rule, it cited public comments warning that some providers, including children’s hospitals, could lose revenue. It later asked for alternative counting methods in the 2023 outpatient payment proposed rule and said it was still reviewing those comments.
OIG made two recommendations: recover the $154,210 from the two hospitals, and revise the guidance to match the statute, a change OIG said could have saved $379.9 million over the audit period. CMS agreed to the first. On the second, it said it would weigh OIG’s findings, keep exploring options for future rulemaking and update its Provider Reimbursement Manual as needed to match any new regulations.
The organ audit is part of a wider OIG review of transplant financing. The watchdog said it is conducting several other audits of organ procurement organizations and transplant centers, including one examining whether transplant hospitals claim only allowable organ acquisition costs on their Medicare cost reports.
What it means for people on Medicare
The audit concerns how hospitals are reimbursed, not what patients pay. No beneficiary owes money because of it, and it does not affect transplant waiting lists, organ matching or anyone’s eligibility for a transplant.
The broader cost still matters to older Americans. Organ acquisition payments are part of the hospital spending Medicare funds alongside other inpatient care, and OIG estimates that the counting rule shifted tens of millions of dollars a year onto Medicare that federal law assigns to other payers. As CMS weighs its response, the question is whether Medicare will keep absorbing a share of costs for patients who are covered by private insurance or other programs.
For people who need a transplant, Medicare coverage rules are unchanged. Medicare covers heart, lung, kidney, pancreas, intestine and liver transplants at Medicare-approved facilities, along with related hospital care and, in many cases, the anti-rejection drugs that follow. Details are listed on Medicare’s organ transplant coverage page.
Transplant patients carry costs long after the surgery
The dispute over organ accounting is between CMS and hospitals, while households dealing with a transplant or other serious illness face ongoing prescription costs and coverage decisions that sometimes need to be challenged.
The Medicare Cost & Coverage Protection Kit includes a medication and cost tracker, the prior-authorization appeal steps and the new Part D out-of-pocket cap, which help keep long-term drug costs and coverage disputes organized.
Work through the appeal steps in The Medicare Cost & Coverage Protection Kit.
This article was prepared with AI assistance and reviewed against the linked official sources.
