The HHS Office of Inspector General (OIG) has issued a report on variations in Medicare outlier payments made to acute hospitals under the inpatient prospective payment system (IPPS) during calendar years 2008 to 2011. According to the OIG, almost all hospitals received outlier payments, but some hospitals received a much higher proportion of Medicare IPPS reimbursements from outlier payments. Specifically, outlier payments averaged 12.8% of the Medicare IPPS reimbursement for 158 hospitals, compared to an average of 2.2% for all other hospitals. As a result, the high-outlier hospitals ended up charging Medicare substantially more for the same Medical Severity Diagnostic Related Groups (MS-DRG) provided in the subset of hospitals compared to other hospitals, even though their patients had similar lengths of stay. There were 16 specific MS-DRGs that accounted for 41% of such outlier payments. The OIG observed that high outlier charges could result from a hospital attracting a disproportionate share of exceptionally costly patients or applying costly technologies and treatments. Nevertheless, the OIG raised concerns about why charges for similar cases vary substantially across hospitals, and recommended that CMS: (1) instruct its contractors to increase monitoring of outlier payments, (2) publicly report hospital data regarding the distribution of outlier payments; and (3) examine whether MS-DRGs associated with high rates of outlier payments warrant coding changes or other adjustments. CMS concurred with the recommendations.