Hospitals and doctors ended up with nothing but rocks in their bags on Oct. 31. The unveiling of two Medicare payment regulations for 2002 on Halloween left provider groups considering what tricks they can pull to stop the final regulations from going into effect on Jan. 1.
The American Hospital Association is "exploring all options" including suing the federal government to at least delay by six months the 2002 outpatient payment regulations that it estimates will cut $1 billion from current rates. Meanwhile, the American Medical Association is calling on Congress for a "fix" that would avoid implementing a 2002 fee schedule that will pay doctors 5.4% less than this year.
Both sets of final regulations were released on Oct. 31. The physician fee schedule was published in the Nov. 1 Federal Register, and the hospital outpatient payment regulations were published on Nov. 2.
"America's hospitals are outraged that (the Centers for Medicare and Medicaid Services) would choose to put in place now any changes that reduce payments to hospitals especially in light of all of the disaster preparedness," said Carmela Coyle, the AHA's senior vice president of policy.
The CMS' complex plan for hospital outpatient payments in 2002 includes reducing the amount the agency has allowed hospitals to receive as "pass-through" payments for new technology devices and drugs. Also, it is proposing that Congress eliminate the pool set aside for unusually high cost cases, called outliers.
Device manufacturers were satisfied with the regulation, which will maintain most of the cost of the high-technology items used for outpatient procedures in the per-case payments.
What was released last week, however, was only part of the 2002 outpatient regulations. The CMS said it won't share the rest of the regulations until around Dec. 1. Those regulations will include the actual rates for each ambulatory payment classifications and the reduction to the pass-through. APC rates will increase by 2.3% across the board in 2002.
The CMS said that although 2002 rates will go into effect on Jan. 1, the agency will not be able to pay 2002 rates until April because of the lag in updating information systems. Thomas Grissom, director for the Center for Medicare Management, said the government would use a system during this time to continue payments to hospitals but said later reconciliations will be necessary.
Hospitals are concerned that the inability of the CMS to get its updated payment system up and running by Jan. 1 will create more paperwork for hospitals and they say it will take until next fall for accounts to be straightened out.
For physicians, the 5.4% cut in the Medicare fee schedule for 2002 is even worse than had been predicted. In August, the AMA warned CMS Administrator Thomas Scully that cuts of 2% to 3% were possible because of a payment formula that is driven in part by the fluctuations in gross domestic product.
"I hope that what will happen is that Congress will get it fixed," said Timothy Flaherty, M.D., chairman of AMA's board of trustees.
The AMA said the 2002 cut would be the fourth in 10 years for physicians and will make it more difficult for new Medicare patients to find a physician.
Because of earlier cuts made to reimbursement for practice expenses, some specialties, including cardiology, cardiac surgery and gastroenterology, will experience even deeper reductions. Payments for coronary artery bypass grafts will drop 8.9% next year, according to the Society for Thoracic Surgery.
Some 87% of physicians across the country participate in Medicare, and CMS officials said they didn't know if this year's pay cut would lower that percentage. However, Grissom said he doesn't believe the pay reduction will lead to access problems for beneficiaries.
The volatility of physician payment updates was cited as a concern by the Medicare Payment Advisory Commission, the independent panel that advises Congress on Medicare policy, at its regular meeting last month. Last year, physician payments rose 4.5%.
The dramatic drop in the 2002 fee schedule comes as a surprise to both members of Congress and the physician community, said Brent Miller, director of federal relations for the 650-physician Marshfield (Wis.) Clinic.
"The hue and cry is beginning right now," Miller said. "Doctors throughout the country are only beginning to realize that there is a problem here."