CMS out­lines re­duc­tions

Health re­form, cod­ing changes among rea­sons for cuts

Modern Healthcare - - The Week In Healthcare - Jen­nifer Lubell

Hos­pi­tals are fac­ing a dou­ble whammy in Medi­care re­im­burse­ment cuts for the com­ing fis­cal year, and based on the cli­mate in Congress it’s un­likely that the re­duc­tions will be done away with, some in­dus­try ex­perts pre­dict.

Last week, the CMS took a first swing at re­duc­ing hos­pi­tal Medi­care pay­ments in is­su­ing its fis­cal 2011 pro­posed rule for hos­pi­tal in­pa­tient rates by sug­gest­ing a net 0.1% cut in re­im­burse­ment. The pro­posed $142 mil­lion cut is the re­sult of CMS ap­ply­ing an ad­just­ment of a neg­a­tive 2.9% to re­coup ex­cess spend­ing that it says took place in fis­cal 2008 and 2009 be­cause of changes in hos­pi­tal cod­ing prac­tices; an in­crease of 2.4% tied to in­fla­tion; and an ad­di­tional 0.4% from other fac­tors that would af­fect spend­ing. Among the pos­i­tive changes are pro­posed in­creases in se­lected med­i­cal-de­vice re­im­burse­ment to hos­pi­tals (See story, p. 12).

Cou­pled with a 0.25% man­dated mar­ket­bas­ket cut that was in­cluded in the re­cently passed health re­form law, av­er­age pay­ments in fis­cal 2011 will ac­tu­ally de­crease by 0.35% com­pared with FY 2010 pay­ments, ac­cord­ing to the Amer­i­can Hos­pi­tal As­so­ci­a­tion. Hos­pi­tals al­ready were ready­ing for a 0.25% cut man­dated un­der the health re­form law for 2010. That pro­vi­sion tech­ni­cally took ef­fect in April, with the AHA es­ti­mat­ing the cut to re­duce hos­pi­tal pay­ments by $201 mil­lion this year.

Rep­re­sen­ta­tives of the hos­pi­tal in­dus­try in­clud­ing the AHA were not pleased with the new cuts. The CMS’ lat­est pro­posal if en­acted would rep­re­sent the largest de­cline hos­pi­tals have seen to their an­nual update in the last 12 years, said Don May, the AHA’s vice pres­i­dent for pol­icy. “This cut takes $3.7 bil­lion out of an al­ready un­der­funded sys­tem. Next year, hos­pi­tals will ac­tu­ally be paid less than they are this year, even though they will be pro­vid­ing the same high-qual­ity pa­tient care,” May said.

New Jersey hos­pi­tals will be look­ing at a neg­a­tive 0.75% re­duc­tion in fis­cal 2011, tak­ing in the health re­form and pro­posed in­pa­tient pay­ment re­duc­tions, said Sean Hopkins, se­nior vice pres­i­dent for health eco­nom­ics at the New Jersey Hos­pi­tal As­so­ci­a­tion. “This will knock out $131 mil­lion in Medi­care pay­ments” to hos­pi­tals in the state this com­ing year, Hopkins said.

The CMS ar­gues that its Medi­care sever­i­ty­di­ag­no­sis re­lated groups, or MS-DRG, cod­ing sys­tem that went into ef­fect in 2008 has re­sulted in hos­pi­tals cod­ing for more se­vere care than pa­tients are get­ting. Hos­pi­tals may have been get­ting paid more, but changes in their cod­ing prac­tices “did not re­flect in­creases in pa­tients’ sever­ity of ill­ness,” the agency stated in ex­plain­ing the rea­sons why it was re­coup­ing pay­ments from the in­dus­try.

The AHA, though, con­tends the agency failed to look at real pa­tient sever­ity in craft­ing this pay­ment ad­just­ment. Ac­cord­ing to May, health­ier pa­tients are go­ing to out­pa­tient set­tings, such as am­bu­la­tory surgery cen­ters and doc­tor’s of­fices, leav­ing hos­pi­tals with the most se­verely ill pa­tients. Im­proved phar­ma­ceu­ti­cals and bet­ter man­age­ment of med­i­cal con­di­tions “means that the pa­tients get­ting ad­mit­ted are sicker be­cause their meds aren’t work­ing,” he ex­plained.

At San­ford Health-Mer­itCare, Health Ser­vices Di­vi­sion North, Fargo, N.D., Chief Med­i­cal Of­fi­cer Rhonda Ket­ter­ling said, “We’re cer­tainly see­ing pa­tients with more co-mor­bidi­ties that have com­pli­ca­tions and need more in­ten­sive care af­ter a pro­ce­dure in our hos­pi­tals.” Health­ier pa­tients, in the mean­time, are check­ing into the hos­pi­tal for la­paro­scopic or robotic surgery in the morn­ing and check­ing out in the af­ter­noon, she said.

In the past, sim­i­lar pro­posed ad­just­ments re­lated to what CMS be­lieves is MS-DRG “up­cod­ing” have ei­ther been re­duced by Congress or post­poned by reg­u­la­tors. The CMS pro­posed in­pa­tient rule al­most al­ways of­fers a “worst case sce­nario,” with the fi­nal rule­mak­ing de­liv­er­ing a less se­vere im­pact than the pro­posal, ac­cord­ing to an anal­y­sis of the 2011 pro­posed rule by Wells Fargo Se­cu­ri­ties. Case in point was the fis­cal 2010 rule-

Hopkins: N.J. look­ing at $131 mil­lion re­duc­tion in Medi­care pay­ments.

Ket­ter­ling: Sicker pa­tients stay longer than healthy pa­tients.

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