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AHA to MedPAC: Raise, Don't Cut Hospital Payments

 |  By cclark@healthleadersmedia.com  
   January 08, 2013

Flawed analysis and methodology, and the failure to understand that hospitalized patients require costlier care than in the past permeate the Medicare Payment Advisory Commission's December recommendations for reducing inpatient and outpatient payment rates for FY 2014, which starts this October.

Those are among the concerns expressed in the American Hospital Association's 7-page letter Jan. 4 to MedPAC chairman Glenn Hackbarth.

"The AHA believes a positive update (increase) for both hospital inpatient and outpatient payments in FY 2014 is absolutely essential," wrote Linda Fishman, senior vice president for public policy analysis and development.

Medicare payment margins fell sharply in 2011 from a negative 4.7% in 2010 to a negative 5.8% in 2011—a drop of 1.1 percentage points.

"This means that, across all service lines, Medicare paid only 94 cents on the dollar of cost to treat Medicare beneficiaries. For outpatient services, Medicare paid 89 cents on the dollar (a margin of negative 11%), and for inpatient services, Medicare paid only 96 cents on the dollar (a margin of negative 4%), she wrote. The projection for 2013 is a negative 6%.

"Medicare has not fully covered the costs of caring for Medicare beneficiaries since 2002. Payments that result in such negative margins over more than a decade cannot be considered adequate, particularly in the face of the low cost growth hospitals have sustained since 2009."

The letter also expressed concern about removal of higher hospital-level differentials for 71 ambulatory payment classifications, or MedPAC's recommended "site-neutral payment policy."  Currently, some services may be billed at much higher rates if they are performed in a hospital outpatient department (HOPD) rather than in a clinician's office.

"HOPDs are different from physician offices and provide a wide range of essential acute-care and diagnostic services, support public health needs, and provide access to care to vulnerable patient populations that is not otherwise available in the community," Fishman wrote. "They also provide 24/7 access to emergency care and standby capacity for emergency response that is not separately funded and must be built into payments for all services."

For example, the payment for one particular procedure, a Level II echocardiogram without contrast, would be cut 67% over what is paid this year, cutting reimbursement for that one service by $275 million. 

Level III nerve injections would be cut by 32%, representing a cut of $108 million, and Level II neuropsychological testing would be cut by 86%, representing a cut of $1.9 million.

Another category of payment change Fishman included is for documentation and coding cuts.

"Congress directed CMS (the Centers for Medicare & Medicaid Services) to remove $11 billion in inpatient prospective payment system payments to account for alleged overpayments associated with documentation and coding changes," she wrote. 

"The AHA firmly believes that no additional adjustments for documentation and coding should be considered," adding that "we disagree with MedPAC staff's assertion that changes in documentation and coding related to the move to Medicare Severity Diagnosis-Related Groups (MS-DRGs) inflated payments in FY 2010."

Fishman characterized the MedPAC recommendation on "a flawed analysis" that "additional overpayments were made in FY 2010," she wrote.

"Using this same flawed methodology, MedPAC and CMS actually maintained that real case mix was negative during the initial years following the implementation of MS-DRGs. However, numerous other indicators suggest that Medicare patients are getting sicker in ways that were not appropriately accounted for under the old DRG system. As identified in the attached TrendWatch report, rates of chronic conditions are rising."

Four out of five Medicare beneficiaries suffer from chronic diseases and two-thirds of them have two or more chronic diseases, she wrote.

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