At a time when hospitals' Medicare margins are the lowest they've been in decades, industry officials are wondering why a federal advisory panel is eyeing a reduction to their Medicare payments.
MedPAC advice to cut payments agitates hospitals
The Medicare Payment Advisory Commission, in issuing its draft recommendations last week on provider payments in fiscal 2011, essentially called for the same recommendations on updating hospital inpatient and outpatient payment rates as last year, proposing an adjustment to indirect medical education payments to help finance a quality incentives program for hospitals.
On top of this proposed update, however, MedPAC suggested that further reductions be made to hospital reimbursement.
Specifically, the advisory panel is calling on Congress to adjust inpatient base payments as a means to recoup overpayments that have resulted from the CMS' new Medicare severity diagnosis-related groups coding system.
That MedPAC would make such a draft recommendation came as a bit of a surprise to Don May, vice president for policy with the American Hospital Association, who attended the MedPAC meeting.
Even with these so-called “potential” overpayments, it's important to note that “hospital margins are at the lowest level they've been in 20 years,” representing real Medicare underpayments to hospitals, he noted.
Hospitals' Medicare margins were historically low in 2008, at negative 7.2%, and are expected to remain negative through 2010, MedPAC reported, although a slight uptick is expected in 2010.
What's of critical concern is whether these coding reductions, in combination with the yearly updates hospitals receive, would result in negative overall payment updates to hospitals, May said.
MedPAC claims such an adjustment is necessary, because of the documentation and coding improvements that have transpired under the MS-DRG system, which was implemented in 2008. The new system, designed to better identify the severity of a patient's condition, “created incentives to better document and code secondary diagnoses,” according to MedPAC researchers.
These coding improvements resulted in higher payments—but without any change in patient complexity or the cost of care. Under these circumstances, Medicare payments shouldn't have increased, MedPAC researchers stated.
MedPAC in its draft recommendation suggested that a 1% payment reduction take place annually, possibly over eight years, to recoup overpayments made to hospitals in 2008 and 2009, and to prevent any future overpayments that would result from documentation and coding improvements under the MS-DRGs.
Some MedPAC commissioners were concerned about the draft recommendations.
“We don't want to create a hospital ‘SGR' going forward,” warned George Miller, a MedPAC commissioner who is the managing partner at First Diversity Healthcare Group, Springfield, Ohio.
This isn't the first time Congress has reduced hospital payments to anticipate for “upcoding” under the MS-DRG system. Hospitals in 2008 and 2009 initially experienced reductions of 0.6% and 0.9%, respectively, to offset any anticipated overpayments, although the CMS held off from issuing a reduction in 2010 (Aug. 10, p. 8).
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