Senators Ask CMS to Review Proposed Hospital Payment Decrease

Janice Simmons, July 20, 2010

In a letter sent to Centers for Medicare & Medicaid Services Administrator Don Berwick late last week, 52 senators asked the agency to review its current proposal to decrease Medicare payments to hospitals—due to coding changes—by 2.9% in fiscal 2011.

The letter, which was sent several days after a similar House letter went to CMS with 242 congressmen's signatures, says that before any such a change goes into effect, "we need to confirm that the appropriate and correct methodology" has been used and that the proposed rule takes into consideration any changes in patient severity.

The letter stated that coding offsets are based on the assumption that hospital payments "have increased solely due to changes in coding or classification of patients." However, other reasons for such changes could occur such as the possibility that some patients have more serious illnesses or complex conditions.

And, as more patients are being successfully cared for in outpatients departments, those patients who end up being admitted to hospitals are more likely to be seriously ill, the letter added. Therefore, if the proposed rule is enacted, it could cost hospitals across the country an estimated $3.7 billion in fiscal 2011.

The senators cited the Medicare Payment Advisory Commission as showing that hospitals are paid "substantially less" than the cost of delivering care to Medicare beneficiaries. In fact, MedPAC projected a -5.9% decline overall for the Medicare margin for hospitals in fiscal 2010. Keeping this in mind, Congress should provide a full inflation update for hospital payments in fiscal 2011, they said.

In addition, the Medicare Inpatient Prospective Payment Rule contains a smaller-than-usual update of 2.4%, however, this would be eliminated with the proposed coding offset, the letter said. Many hospitals are reporting, though, that a 2.4% adjustment will not bring them closer this year to the actual rate of cost increases that they have faced.

If the rule is implemented, the senators are requesting that CMS ensure that the final methodology used take into account changes in patient severity. "Otherwise, this cut to hospital payments may adversely affect their ability to care for patients and serve their communities."

Janice Simmons Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at
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