Hospitals want more time to adjust to regulations completed late last week governing Medicare outlier payments.
The new regulations on those payments, which help compensate hospitals for patients who cost more to treat than the standard DRG rate, sprang in part from abuses that landed Tenet Healthcare Corp. in hot water last year (Nov. 18, 2002, p. 10).
The highly anticipated rule will be published June 9 in the Federal Register and becomes effective 60 days after publication, on Aug. 8.
The Centers for Medicare and Medicaid Services' final outlier rule keeps in place the current threshold for outlier payments-$33,560 above the DRG-through the end of fiscal 2003. An outlier threshold amount for 2004, currently proposed at $50,645, will be set when hospital inpatient regulations are issued in August.
American Hospital Association officials expressed concern last week that there isn't enough time for their members to adjust to the new system, which starting in October will eliminate the use of statewide average cost-to-charge ratios to determine hospital costs, using data from each individual hospital instead.
Santa Barbara, Calif.-based Tenet disclosed in November 2002 that HHS' inspector general's office was auditing its Medicare outlier payments, which were four times the national average when measured as a percentage of Medicare inpatient reimbursements. Tenet disclosed that its strategy of rapidly increasing its list prices was a driver of its high outlier payments.
While the AHA agreed to eliminate the use of statewide averages, "when Medicare makes changes that adversely affect certain institutions, they should provide a transition period to ease the blow," said Tom Nickels, senior vice president of federal relations at the AHA.
Nickels said the AHA supports a two-year transition period that would begin in 2004.
The CMS has yet to decide under what circumstances outlier payments will be subject to review, following the final settlement of cost reports to make sure hospitals were paid appropriately for their most expensive cases. The agency is likely to issue a memorandum later this year clarifying those circumstances.
"The criteria for reconciling outliers will be reviewed and if necessary modified each year. ... This was in response to comments from major hospital associations, and will avoid undue negative impacts to hospitals that have been charging appropriately," the CMS said in a written statement.
"The CMS still has a lot of homework to do on this rule," one hospital lobbyist said.
Hospital lobbyists said that between now and October they plan to push for reducing the outlier threshold for 2004 and urging the CMS to add a transition period.