Berwick's First Reimbursement Challenge

New CMS Administrator Donald Berwick, MD, has not yet been on the job a month, and he’s already finding himself in the middle of one of those reimbursement tugs-of-war that seem to define modern healthcare. How he responds may indicate what hospitals and physicians can expect from CMS during his tenure, particularly when it comes to getting paid.

Berwick’s reputation precedes him.

As former president of the Institute for Healthcare Improvement, his is one of the most recognizable names in the industry. It is no secret that he considers the system wasteful—he has said the waste level in medicine approaches 50%—and would welcome the opportunity to trim fat and redesign delivery. He has been one of the industry’s big thinkers and relentless reformers for quite awhile.

But now comes the interesting part. Can he translate his theories into concrete change? It will take more than big ideas to change an organization that has a budget larger than most nations’ GDP. The political pressure, not matter what he does, will be relentless.

Take, for example, a recent CMS proposal to reduce hospital inpatient payments by 2.9% for fiscal year 2011. The decision was made before Berwick took office, and CMS says it is not cutting payments so much as recouping overpayments from FY 2008 and 2009 that were due to improvements in the coding and classification of patients, rather than real case-mix changes. The retroactive fix will save the organization $3.7 billion, and was given the thumbs-up by the Medicare Payment Advisory Commission.

When combined with the initial reimbursement update, the net change is only about a 0.8% decrease. But, a cut of that magnitude will have a big impact on the hospital industry, which has been lobbying hard to convince Berwick to eliminate the reduction, which is known as the "coding offset."

Just in the last week, Berwick has received letters from a group of 52 Senators, a coalition of 242 House members, and three hospital associations. All asked Berwick to revisit the math and reconsider the cut.

The groups claim that CMS used a flawed methodology to determine the coding change, and the AHA included supporting evidence from two new studies. An analysis by the Moran Company argues that CMS didn’t adequately isolate documentation and coding issues from other factors when calculating the case mix index, and a report from an economics professor takes issue with CMS’ claim that the severity of case mix has been on the decline.

To really drive the message home, hospital trade groups have even been buying television ads implying that the cut will ultimately hurt patient care.

So how will Berwick react to the growing chorus calling for the cuts to be delayed?

Don’t count on him giving in. Here’s Berwick talking about making healthcare more efficient nearly five years ago: “You’re going to run into stakeholders who are going to tell you that you’re harming care, and the knee-jerk reactions of doctors and others will be to reinforce that idea.”

Will Berwick the CMS Administrator have the same attitude and resolve as Berwick the IHI President, now that he’s in the political hot seat and responsible for all the unintended consequences of major change?

We’ll soon find out.