WASHINGTON – The nation’s hospitals will get an extra year to adapt to Medicare’s new severity-adjusted payment system, according to a final rule released last month by the Centers for Medicare & Medicaid Services.
That may have been the best news for the industry, which will still face adjustments to rates that are expected to cut payments to hospitals because of expected upcoding in the severity of cases of Medicare beneficiaries.
The expansive rule also seeks to increase the number of care quality data being collected, and it makes several adjustments that will widely affect what the Medicare program pays hospitals for providing care to beneficiaries.
The new system, which goes into effect on October 1, will create 745 new severity-adjusted, diagnosis-related groups of illnesses, replacing the previous schedule of 538 DRGs. The new system will vary payments based on whether patients have co-morbidities or complications.
The new system will raise the ante for hospitals to better document care and patients’ conditions, said Garri Garrison, director of 3M Consulting Services, a business unit of 3M Health Information Systems. “Hospitals will need to work with their staffs to get more complete information,” she said.
To soften the blow of switching to the new system, CMS will phase it in over two years and pay providers using a 50-50 blend of payment approaches in fiscal year 2008 before fully switching to the severity system in fiscal year 2009.
Medicare Severity DRGs will pay significantly more for sicker patients who need more health resources. CMS expects providers to aggressively document patient health issues in efforts to maximize Medicare reimbursement. In anticipation, the final rule implements a 2.4 percent rate reduction that CMS terms a “behavioral offset.”
The American Hospital Association said it plans to oppose the reduction and work with Congressmen who have already indicated opposition to the approach. AHA estimates the offset will reduce payments to hospitals by $1.1 billion in fiscal 2008 and by almost $20 billion over five years.
“CMS struck an unnecessary and demoralizing blow against hospitals’ ability to care for patients,” said Rich Umbdenstock, AHA’s president and CEO.
Other groups echoed the AHA’s concern.
“We remain deeply concerned that CMS is implementing a prospective cut to account for what the agency predicts will be Medicare payment increases resulting from hospital coding case-mix changes with the new DRG system,” said Blair Childs, senior vice president of Public Affairs for Premier, an alliance of hospitals and hospital systems.