Medicare's prospective payment system start date for rehabilitation hospitals is finally set to arrive Jan. 1, 2002, and many providers are breathing a sigh of relief.
The long-awaited PPS, established by the Balanced Budget Act of 1997, was originally slated to take effect Oct. 1, 2000, according to HCFA, now the Centers for Medicare and Medicaid Services. The agency missed that deadline and pushed the start date to April 1, 2001, and later to Oct. 1, 2001. After more than a year of administrative delays, final payment system regulations were published in the Federal Register Aug. 7, and the industry has been given the go-ahead for implementation next month.
Skilled-nursing, outpatient and home health providers already have made the transition to the PPS, which replaces cost-based systems. Industry leaders have been working closely with the CMS to develop a PPS specific to inpatient rehabilitation services. Inpatient prospective payment systems for psychiatry and long-term acute-care hospitals are scheduled to go into effect Oct. 1, 2002.
"You have to congratulate the CMS for moving this thing along and listening to what people were saying and acting accordingly," said Ken Aitchison, president and chief executive officer of Kessler Rehabilitation Corp., a five-hospital system based in West Orange, N.J. "I think they've done a pretty good job."
Aitchison, who served as chairman of the American Hospital Association's Governing Section for Rehabilitation Hospitals and Programs, also led a PPS task force for the American Medical Rehabilitation Providers Association. The Washington-based group has been the leading advocate in championing congressional support of the rehabilitation industry PPS.
Under the terms of the new PPS, rehabilitation facilities will be reimbursed based on the characteristics of each patient they admit (See chart). Medicare will pay hospitals more to care for patients with greater needs, as determined by an assessment of their diagnoses.
"We're very anxious to get this system up and running on Jan. 1," said Carolyn Zoller, vice president of government relations and policy development at the AMRPA. "We sponsored four PPS training seminars in addition to those sponsored by the CMS."
Fiscal intermediaries in each state held training sessions this fall on new PPS billing and payment, she said. Aitchison said Kessler spent December briefing staff and testing the company's financial systems and performance as if the PPS were already in place.
"People who have been paying attention realize this is among the most significant things that have happened in rehab since Medicare started," Aitchison said. "We're eligible to go in on Jan. 1, and are going in 100% right off the bat."
According to final PPS guidelines published by the CMS, roughly 1,200 inpatient rehabilitation facilities, including both freestanding hospitals and special units in acute-care facilities, will have a choice about when to transition into the new system. They may either go directly to the full PPS rates on Jan. 1, 2002, or they may ease into the new payment system over one year. For facilities choosing the flexible plan, payment would be based on a blend of rates paid under the old and new systems, according to the CMS.
"The goal of the case-mix-adjusted prospective payment system is to provide a fair payment for healthcare services to beneficiaries," HHS Secretary Tommy Thompson said in a statement. "These rehab facilities across the country are helping many beneficiaries to be healthier, more productive citizens."
Although some smaller providers may see their reimbursements drop, larger providers, especially those working efficiently to deliver high volumes of care, may see significantly greater levels of reimbursement.
Officials at Birmingham, Ala.-based HealthSouth Corp., the industry's largest provider with 96 rehabilitation hospitals, said they believe the company will benefit greatly from the new PPS because its costs are lower than average. If the PPS had been implemented on April 1, HealthSouth would have made $30 million to $40 million more this year, the officials said.
"We have been very successful in reducing costs in our inpatient rehabilitation facilities," said Richard Scrushy, HealthSouth's chairman and CEO. "We will have a chance for the first time to earn a margin on our Medicare inpatient rehabilitation business."