The starting date for a Medicare prospective payment system for rehabilitation hospitals may get pushed back again, despite the industry's pleas to bring it on.
The industry had been led to believe that the PPS would start Oct. 1, but an administrative logjam at the Centers for Medicare and Medicaid Services-formerly known as HCFA-has pushed back the publishing of final regulations for the payment system. The CMS will only say that it plans to publish the rule in the "near future."
"It will be very, very disappointing if this does not get done by January (2002), almost anger-provoking," says Ken Aitchison, president and chief executive officer of Kessler Rehabilitation Corp., a five-hospital system based in West Orange, N.J. Aitchison chaired a PPS task force for the American Medical Rehabilitation Providers Association.
Rehabilitation hospital executives say they have had a relatively positive experience working with the CMS to develop the system, which will cover freestanding rehabilitation hospitals as well as rehabilitation units in acute-care facilities. Coming after the problem-plagued PPS transitions for home health and skilled-nursing facilities, rehabilitation hospitals were able to negotiate with the CMS for a flexible transition period and less-cumbersome paperwork. Hospitals have the option of phasing in the PPS over three years or immediately adopting the system.
The PPS was a result of the federal Balanced Budget Act of 1997, which set an implementation date of Oct. 1, 2000. HCFA later pushed the date to April 1, 2001. When that was missed, the Oct. 1, 2001, target was informally set and communicated to the industry (April 2, p. 44).
The implementation delays coming on top of nearly four years of development for the PPS, have the industry on edge. Earlier this month, in a letter to HHS Secretary Tommy Thompson and CMS Administrator Thomas Scully, a coalition of five associations-including the AMRPA, the American Hospital Association and the Federation of American Hospitals-said the rumored delay of PPS implementation to Jan. 1, 2002, was "discouraging and unacceptable."
The associations are pushing to move forward with the PPS because it will be a financial windfall for many of their members.
The new system will pay hospitals based on the estimated cost of taking care of patients, using a classification system with about 100 categories to group patients, depending on their diagnosis and functional status. The cost-based system has rewarded hospitals that had higher costs in a base year when rates were set and did not account for cost variations at a facility.
"When a patient comes through the door of your facility, you are going to know how much money you will receive," says Aitchison of the new system.
The industry's largest player, for-profit HealthSouth Corp., based in Birmingham, Ala., owns 96 rehabilitation hospitals. Officials said the company would have made $30 million to $40 million more this year had PPS been implemented on April 1. HealthSouth Chairman and CEO Richard Scrushy says he is expecting to make a profit of $1,200 to $1,500 per case under rehabilitation PPS vs. just breaking even in the cost-based reimbursement system.
But not all rehabilitation hospitals are disappointed with the government's sluggishness in getting the PPS under way.
"We are grateful for the delay," says Sally Gammon, president and CEO of 75-bed Good Shepherd Rehabilitation Hospital in Allentown, Pa. "We believe that we are going to have to basically tighten our belts when the PPS comes."
Medicare and hospitals will have some preparation to do after the final regulations are published. The CMS has said it will need a minimum of three months to implement the system, including installing new software to process claims under the PPS.
Hospitals, likewise, will need to revamp their financial systems and train staff. Also, rehabilitation hospitals will need to learn how to get patients out of their hospitals quicker if they want to be successful under the PPS.
Despite collaborative development of the PPS regulations, at least one issue remains unresolved. The industry has pushed for 5% of Medicare payments to rehabilitation hospitals to go into a pool to pay for high-cost patients. In its proposal, HCFA set the outlier pool at just 3%. The industry says the higher level is needed to make sure hospitals have an incentive to take sicker patients.