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Newsletter Article


New Payment Rules Promote Accuracy, CMS Says

By John Reichard, CQ HealthBeat Editor

August 1, 2007 – Centers for Medicare and Medicaid Services officials trumpeted new payment rules issued Tuesday and Wednesday as helping to ensure the long-term survival of Medicare by increasing the accuracy of payments for inpatient hospital care, rehabilitation treatment, and care in skilled nursing facilities.

The final version of the inpatient payment regulation, perhaps the most closely watched among the three, partially addresses complaints from Capitol Hill about a proposed version that would have reduced payments by 2.4 percent to adjust for expected overbilling by hospitals in response to a new set of payment categories. Instead, the rule would lower payments by 1.2 percent in the year that starts October 1, although CMS hinted that additional such adjustments might be made in future years.

"Substantial evidence supports our conclusion that, absent such an adjustment, aggregate payments for inpatient hospital services would increase significantly under the new system—without any corresponding growth in actual patient severity," said CMS Chief Actuary Richard Foster. "If we didn't make this adjustment, the Medicare Part A Trust would be exhausted an estimated 18 months earlier than previously forecast."

Payments to hospitals for inpatient care will rise a total of $4 billion under the rule, CMS estimated.

The rule also includes provisions to ensure that Medicare no longer pays for the additional costs of certain preventable conditions, including certain infections acquired in the hospital, CMS said. And it expands the list of publicly reported quality measures and reduces Medicare's payment when a hospital replaces a device that is supplied to the hospital at no or reduced cost, the agency added.

A final regulation announced Tuesday for inpatient rehabilitation facilities increases their payments an average of 3.2 percent in the fiscal year starting October 1, CMS said. The rule also states that, as of July 1, 2008, the agency will no longer consider "co-morbidities" in determining whether a facility qualifies for inpatient rehabilitation payments.

The American Hospital Association blasted that decision. "CMS' own analysis shows that in just one year alone, approximately 31,000 patients would no longer qualify for inpatient rehabilitation care without this provision," said AHA Executive Vice President Rick Pollack. "Where does CMS think these patients will go to get the specialized care they need?"

In the third rule, CMS announced that rates paid to skilled nursing facilities will rise by 3.3 percent in fiscal 2008.

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