Medicare giveth, and it's trying to figure out how to taketh away.
Last week, in its proposed Medicare outpatient prospective payment system regulations for calendar 2002, the Centers for Medicare and Medicaid Services gave hospitals $450 million in increased payments while taking away the same amount in new drug and technology "pass-through" payments. Yet, hospital officials breathed a sigh of relief as the CMS said it would continue to study what to do in the future about excess payments that amounted to $1 billion last year.
"(CMS) basically acknowledged that there is a problem, which is good, and expressed a willingness to try to work it out," said Thomas Nickels, the American Hospital Association's senior vice president of federal relations.
The CMS didn't set a time for a decision about the overpayments, but said in the draft regulation that "a significant pro rata reduction could be required for 2002."
Medicare implemented a new PPS for hospital outpatient services in August 2000. Under the system, Medicare pays hospitals a single fixed payment for each outpatient episode based on what ambulatory patient classification the services fit into. Medicare reserves a pool of money, initially set at 2.5% of all the year's projected total outpatient pass-through payments, to pay hospitals extra when they use certain new devices or drugs.
But hospitals successfully lobbied Congress last year to have the CMS suspend the cap on the pass-through payments for services during for the first year. This cap relief became a financial windfall for hospitals.
According to estimates by hospital industry officials, Medicare paid hospitals about $1.4 billion in pass-through payments over the past year. A 2.5% cap would have allowed only about $425 million in pass-throughs.
While the CMS studies how to adjust to bring pass-through payments in line with the cap, its proposed regulation effectively cuts into the money hospitals will receive for pass-through payments next calendar year.
Under the proposed rule, Medicare would reduce pass-through payments for certain new devices. For example, the device discount for insertion of a cardioverter-defibrillator would be $6,449 and the implantation of a neurological device would be $4,330. The payment reductions, affecting 25 procedures, would save Medicare $450 million next year.
Not coincidentally, the 2.3% increase in Medicare outpatient payment rates in the proposed regulations would mean an additional $450 million to hospitals in 2002.
The CMS published the proposed regulations in the Aug. 24 Federal Register with a 40-day public comment period.
In the proposed regulation, the CMS also said it would create a new payment category for patients under observation. This would be a welcome addition for hospitals that, with the implementation of the new outpatient PPS, lost the means to bill Medicare for these patients who didn't fit into an existing payment group. Under the proposal, Medicare would pay hospitals for stays of less than 48 hours to monitor patients for one of three conditions: chest pain, asthma and congestive heart failure.