I had to laugh the other day when I saw that hospital lobbying organizations were protesting the potential 2.9% in reimbursement from Medicare that CMS plan to introduce in 2011. Suffice to say, it is a complicated issue, but essentially, the government believes that this cut is necessary to offset the potential effect of coding changes on hospital reimbursement. It's called colloquially, the "coding offset," and you should expect to hear a lot more of it as we move through summer and into the fall, when reimbursement rates for the next year will be set. The rationale behind the coding offset is the assumption that hospital payments have increased solely because of changes in coding, or classification of patients. But that's not why I laughed.
The hospitals' argument—with which some 52 U.S. senators agree with via their signatures on a letter to Don Berwick, the new Medicare administrator--is simply that the reimbursement cut needs to be reconsidered, because hospitals want patient severity of illness to be included in the calculations. In other words, their patients are sicker than they used to be.
That sounds completely logical. But here's what I found funny: That's essentially the same argument that hospital administrators have routinely scoffed at from doctors. Physicians have been using the "my patients are sicker" argument with just about every attempt that hospitals or other organizations to improve quality of care. If the physician doesn't score high on quality or readmission data, well, his patients are sicker than the other guy's.
Smart hospital administrators and chief medical officers don't just take that "my patients are sicker" excuse at face value. They have found ways in recent years through ever more robust medical informatics methods to determine whether that was really the case. In most instances, the "my patients are sicker" reasoning didn't hold up under the increased scrutiny. Which is why they always laugh when the issue comes up in scuttlebutt about their relationships with some of their most difficult physician partners. The irony of hospital administrators using that same reasoning with this letter is why I laughed.
Look, to be fair, all the administrators (and 52 senators) are asking for is that patient severity be taken into account when this decision is being made. Their argument is that since more patients are being treated in outpatient environments, only the truly sick are admitted to hospitals for inpatient care. That makes sense, and it's logical, but just because something is logical and makes sense doesn't necessarily mean it's true.
Patient severity should be taken into account, but who's going to come up with a methodology that all parties agree with? And how long will that take?
Time is of the essence. The letter estimates that if the cuts are enacted beginning in 2011, as scheduled, hospitals will be out an estimated $3.7 billion compared with this year.
When even MedPAC itself estimates that hospitals are already being paid 5.9% less than the cost of care for Medicare beneficiaries, hospitals are understandably nervous about any further reduction in their revenues—especially because healthcare reform legislation seems to promise more of hospitals' revenue streams will depend on government reimbursement, which doesn't cover the true cost of care.
This is a first skirmish between hospitals and the new head of CMS. Despite his experience as the chief executive of the Institute for Healthcare Improvement, Don Berwick is an unknown quantity as the administrator of the largest payer in the land. It will be interesting to see whether he's prepared to do an end-run around the very members of Congress who can go behind his back and provide more funding for hospitals. Will "my patients are sicker" resound with him?
Philip Betbeze is the senior leadership editor at HealthLeaders.