CMS outlines reductions
Health reform, coding changes among reasons for cuts
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.