The hospital industry reacted lukewarmly to the CMS' Medicare payment update for hospital outpatient services for 2006, saying that the payment increase is less than the rate of hospital inflation and that a proposed change to the outlier threshold could alter the kinds of outpatient services offered by hospitals.
In a wide-ranging proposal announced last week, the CMS proposed increasing payments to hospitals for outpatient services by 3.2% for 2006. Beyond that increase, community hospitals that are sole providers in rural areas would get an additional 6.6% boost in their reimbursements as well. Outlier payments would account for 1% of Medicare's total outpatient spending under the proposal, down from 2%, and the way Part B drugs, biologicals and radiopharmaceuticals are paid would be changed to a system basing reimbursements on average sales prices for such drugs rather than on average wholesale prices.
According to the CMS, the proposal would increase payments to 4,200 hospitals for Medicare outpatient services to $27.5 billion next year from $26.1 billion this year, a 5.4% increase.
CMS Administrator Mark McClellan said in a news release that the changes ensure "Medicare makes efficient use of taxpayer money," but hospital lobbyists questioned several provisions in the proposal.
Don May, vice president of policy at the American Hospital Association, said the 5.4% increase in payments cited by the CMS factors in an increase in volume of services and the actual increase in payments totals 1.9%, lower than the rise in outpatient costs to hospitals.
Another concern is the proposed change in the outlier threshold, May said, which could cause facilities to hesitate on moving some high-cost services to the outpatient setting. "You may have only certain hospitals that will perform these risky services," he said. "We continue to be put in a position where we are treating Medicare patients (but) the cost of these treatments aren't being paid for adequately by Medicare."
The proposal also calls for Part B drugs administered in an outpatient setting to be paid at 106% of the average sales price, compared with the current 83% of the average wholesale price. In a news release, the CMS said the change would mirror the pricing methodology for such drugs when administered in a doctor's office and would bring Medicare payments for them in line with competitive market prices.
In aggregate, drug payments would go down with the change because average sales prices are lower than average wholesale prices, the CMS said.
But Larry Goldberg, director of Washington national affairs for the healthcare practice at Deloitte & Touche, said the changes will fluctuate from hospital to hospital.
Hospitals "will have to look at the drugs they use the most frequently, how much they pay for it and how much Medicare will pay for it," he said. In some cases, he said, the change may even increase the payment a hospital receives for a drug.
The proposed rule will be published in the July 25 Federal Register.