WASHINGTON – As of July, the nation’s providers were still waiting for the Centers for Medicare & Medicaid Services to issue the final regulation to implement radical changes in the reimbursement system used to pay hospitals.
While several experts were seeking tweaks to the system or hoping for some form of transitional period, many expected that a new system, called Medicare Severity DRGs, would be implemented in the form in which it was proposed earlier this summer.
Final regulations governing the inpatient prospective payment system, or IPPS, were expected to be introduced on August 1, and were to go into effect at the start of the federal government’s 2008 fiscal year on October 1.
Several organizations are protesting plans to cut Medicare-related operating and capital inpatient payments by 2.4 percent for the 2008 and 2009 fiscal years. Nevada Gov. Jim Gibbons added his voice to those seeking elimination of the cuts, called a “behavioral offset” by CMS, which expects providers to code claims more aggressively to seek higher payments.
“There is no documentation to support this assumption,” Gibbons said in a letter. “These draconian backdoor reductions could jeopardize beneficiary access to critical hospital services and will stifle hospital investment in technology.”
Members of Congress also attacked the behavioral offset and a smaller reduction for hospitals in urban areas.
“I would not be surprised to see (CMS) scale back on this,” predicted Timothy P. Wolters, a partner in Springfield, Mo.-based BKD Inc., an accounting and consulting services firm. “There’s a lot of backlash from the industry.”
Maryland, which has an all-payer system and has switched to a severity-based reimbursement approach, experienced substantial case-mix growth, said Michael Stitcher, managing director for Navigant Consulting.
Studies by a variety of consulting firms and companies continue to suggest the new system will bring the most significant changes to hospital reimbursement by Medicare since the prospective payment system was implemented in 1983.
The new system has the potential to redistribute funds among the nation’s healthcare facilities, said Paul Shoemaker, president and CEO of American Hospital Directory, a Louisville, Ky.-based company that has posted a projection of case mix index changes and the total IPPS revenue change for all hospitals on its Web site.
“In effect, total Medicare reimbursement may stay about the same, but its distribution among medical services may be profoundly different,” Shoemaker said.
Hospitals will need to assess the impact of severity-adjusted DRGs by product lines, said Leatrice Ford, CEO of ConsultCare Partners. For example, cardiovascular surgery reimbursement is expected to change significantly, she said.
Expected overall increases or decreases in Medicare payment could be as much as 10 percent, said Wolters.
Hospitals will need to improve communications with staff and physicians to better capture secondary diagnoses. The new system reimburses significantly more for treating patients who experience complications or have comorbidities, said Garri Garrison, director of 3M Consulting Services, a business unit of 3M Health Information Systems.
“Hospitals need to work with the medical staff to get more complete information,” she said. “It requires more precise coding.”
Many believe that other payers will adopt some form of the MS-DRG system, in the way they transitioned to prospective pricing after Medicare’s 1983 switch to DRGs.
The regulation as proposed earlier did not allow for a transition from the existing system to MS-DRGs, Wolters said. He said he believed the final regulations might contain a transitional period to give hospitals time to adjust to the new system.