WASHINGTON – The Centers for Medicare and Medicaid Services is expected to publish a Notice of Proposed Rule Making in April as it moves toward a more comprehensive implementation of a severity-adjusted reimbursement methodology.
A CMS spokesperson said the agency is making changes consistent with a March 2005 MedPAC recommendation to align Medicare payments with the actual cost of care.
Last year, CMS enacted an In-patient Perspective Payment System rule, which shifted the relative weight – one factor it uses to derive the price – from one developed on charge data to one developed on cost data.
As an interim step, CMS also altered its case-mix classification by deleting eight DRGs (Diagnosis Related Groups), adding 20 and modifying 32.
“The change from the current DRG system to a more sophisticated severity-adjusted DRG system is conceptually the same,” said Bob Leary, vice president of Ingenix. The difference is that severity-adjusted DRGs create more categories based on a more detailed analysis and use of a patient’s complications and co-morbidities.
CMS’s actions are “a prelude to more comprehensive changes” that will be implemented in fiscal 2008, according to the CMS spokesperson.
The agency contracted the Rand Corporation to evaluate five DRG products from 3M, Health Systems Consultants, Ingenix and Solucient. CMS is also looking into building its own DRG system. The ability to improve payment accuracy is the main criterion for selection, said the CMS spokesperson.
Ingenix announced in late February that it is offering a free evaluation license for its MM APS-DRGs (Medicare Modified All-Payer Severity-Adjusted DRGs), which CMS is considering.
“We strongly believe in getting the word out for hospitals and health plans to understand what the potential impact means to them,” said Dean Farley, vice president of analytics and facility services for Ingenix. “We are establishing a position within the industry of ensuring that whatever happens is done in a transparent way.”
“If you don’t know the details of the decision-making process, you can’t manage it,” said Leary.
What is profitable today may not be profitable once the new methodology is put into place, Farley added. Hospitals and health plans need to focus on their operations, making sure coders assign principal and secondary diagnoses accurately and completely and medical staff document their cases.
“If you don’t educate your team effectively, you’re going to leave money on the table,” he said.
Dean said he hopes the public commentary addresses the overall effectiveness of the methodology, an understanding of how to implement it, the best alternative from a productivity standpoint and transparency.