Medicare Compliance & Reimbursement

Lawmakers try to stall Medicare payment changes to avoid a hasty implementation

If you're worried about how much the Centers for Medicare & Medicaid Services' (CMS) proposed changes to your Medicare payment system will rock your hospital's boat, now you have a reason to breathe a (small) sigh of relief.

Reason: Influential lawmakers in both the House and Senate are pleading with CMS to revaluate its proposed changes to the Medicare Inpatient Prospective Payment System (IPPS), which would become effective on Oct. 1, 2006. The agency should delay its proposed rule, which it issued in April, for one year, 189 representatives advised in a July 13 letter to CMS. Reps. Phil English (R-PA) and Earl Pomeroy (D-ND) led the bipartisan group of House lawmakers.

The proposed rule would make two major changes to the IPPS: 1) base diagnosis-related group (DRG) payment weights on estimated costs rather than charges beginning in fiscal year (FY) 2007; and 2) "create a new classification system that incorporates the severity of a patient's illness into the Medicare inpatient payment" beginning in FY 2008 or earlier, House lawmakers said in a July 13 statement.

But because the rule's changes are the most significant adjustments CMS has ever made to the IPPS, lawmakers are advising the agency to proceed with caution. In a separate letter to CMS administrator Mark McClellan, two Senate Finance Committee members wrote, "...we have serious concerns about CMS' proposed methodology and implementation strategy and whether it will, in fact, achieve a fairer and more accurate hospital payment system." Committee chair Sen. Chuck Grassley (R-IA) and ranking member Max Baucus (D-MT) penned the July 7 letter.

Potential relief: The representatives and two senators both want CMS to implement the two major IPPS changes concurrently as the Medicare Payment Advisory Commission (MedPAC) had advised, instead of switching to cost-estimated weights in one year and then severity adjustments in the following year. Lawmakers fear that CMS' implementation plan in the proposed rule could cause "significant fluctuations" in hospital payments.

"We urge you to adopt MedPAC's recommendation of doing both reforms together to minimize the potential 'whipsaw' effect of wide swings in hospital payments," the representatives wrote in their letter to McClellan. "In addition, we ask that you give full consideration to MedPAC's recommendation that the new payment system be phased in over several years, given the magnitude of payment redistribution across DRGs and hospitals," the House lawmakers added.

No word yet from CMS about whether it will heed the lawmakers' warnings, but the agency did release a fact sheet on improving hospital payments on July 17.

To read the representatives' letter, go to www.house.gov/apps/list/press/pa03_english/IPPS0706.html.

To read the letter to McClellan from Senators Grassley and Baucus, go to www.senate.gov/~finance/press/Gpress/2005/prg070706a.pdf.