Diagnostics & Imaging Week Washington Editor

The Centers for Medicare and Medicaid Services last week released a revamp of the way it pays hospitals under the inpatient prospective payment system (IPPS), but Congress has expressed serious reservations about the move. And at least one industry group believes that Congress may overturn the rule, much as it has other attempts by CMS to rein in spending.

In many such instances, however, CMS is acting at Congress’s expressed intent, often embodied in the Deficit Reduction Act (DRA) of 2005.

CMS posted an Aug. 1 statement saying that the restructured diagnostic-related groups (DRGs) will “account more fully for the severity of each patient’s condition” and that other provisions will “ensure that Medicare no longer pays for the additional costs of certain preventable conditions,” such as hospital-acquired infections.

According to CMS, payments to all hospitals “will increase by an estimated average of 3.5% for FY 2008 when all provisions of the rule are taken into account, primarily as a result of the 3.3% market basket increase.” The agency stated that payments to specific hospitals may vary from this figure based on the severity of the illness of the patients in that hospital.

The rule replaces the existing 538 DRGs with a set of 745 Medicare severity-adjusted diagnosis-related groups (MS-DRGs), which the agency depicted as budget-neutral. The change is designed to boost payments for hospitals that serve sicker patients and will be phased in over two years, according to CMS.

CMS’s acting deputy administrator Herb Kuhn said in a statement that the changes, “first proposed by the Medicare Payment Advisory Commission in 2005,” will allow the inpatient service payments to be “more accurate and better reflect the severity of the patient’s condition.” He also indicated that total payments to hospitals would rise by a total of $4 billion in FY08.

But not everyone involved agrees with the agency’s assessment.

In an Aug. 1 press statement, Rich Umbdenstock, president/CEO of the American Hospital Association (AHA; Washington) said that “CMS struck an unnecessary and demoralizing blow against hospitals’ ability to care for patients,” and that the final rule will “cut more than $20 billion in Medicare payments for hospital inpatient services,” which he said “flies in the face of Congressional intent.”

Umbdenstock said that while AHA members “support a reasonably paced move to a payment system that better reflects how sick patients are,” they nonetheless are of the opinion that the “misguided policy wrongly assumes major changes in how hospitals categorize patients for payment purposes, penalizing hospitals in advance based on a ‘guess’ by CMS.”

Umbdenstock also decried the zero update to capital-related payments to urban and teaching hospitals, characterizing those payments as helping “hospitals invest in new, high-tech equipment that can help enhance patient quality and reduce healthcare costs and make critical updates to their facilities and information systems.” The AHA chief said that hospitals “that have made long-term investments to improve care, counting, in part, on Medicare paying its share of these costs, have now had the rug pulled out from under them.”

Umbdenstock also referred to activity on Capitol Hill in response to the proposed rule.

On July 18, the House passed by a margin of 412-12 an amendment by John Lewis (D-Georgia) that would bar CMS from using funds “to take any action to finalize (or otherwise implement)” specific proposals included in the proposed rule, which CMS published in May.

Richard Coorsh, spokesperson for the Federation of American Hospitals (FAH; Washington), told Diagnostics & Imaging Week that FAH members “take heart in the margin of support expressed recently by the House, and believe that it will carry over for Senate consideration.” He said some senators who have made their opinion known about this issue “agree with the position expressed by the overwhelming majority of the House.”

“We think there’s a strong chance [of action] in the Senate,” Coorsh said, describing some senators as “very receptive, especially to concerns expressed by rural hospitals.”

DoD to share data with FDA

FDA’s work in collecting epidemiological data to evaluate the safety of drugs and devices is improved with greater data, but data-sharing between federal departments has not always been a fact of life. That is about to change, at least where members of the military and their families are concerned.

FDA and the Department of Defense (DoD) inked an agreement last week that will give the agency a trove of DoD data, including from Tricare (Falls Church, Virginia), the healthcare service that sees to the needs of service men and women and their families. With more than 9 million enrollees, this source of data figures to aid FDA in tracking reactions to devices and drugs for beneficiaries, age newborn to very elderly, who may have seen duty in World War I.

(According to the Cincinnati Enquirer, three members of the U.S. military who served during WWI are still alive as of July 5, including Frank Buckles of West Virginia, aged 106. Buckles lied to recruiters about his age to get into the Marine Corps in 1917 at age 16.)

The data will include “everything, from new medical product information and patient care records to adverse event reports, and domestic and foreign clinical trials,” according to the FDA.

FDA chief Andrew von Eschenbach said that the agency “is privileged to collaborate with DoD to protect the health of all Americans” and that the collaboration represents an “opportunity to create systems to monitor the safety of products [that] should directly benefit those cared for by the armed services as well as many others.”

Representatives from the FDA and the DoD will meet within 30 days of the announcement and quarterly thereafter to hammer out details, but no data will be shared “unless and until adequate procedures and safeguards agreed upon by both federal partners are established and implemented.”

FDA spokesman Christopher Kelly told Diagnostics & Imaging Week that DoD and FDA had previously shared data “on a case-by-case basis,” but that it is not clear at present whether there will be any data compatibility problems.

The Tricare pharmacy database includes data from at least 6 million Americans. However, given the poor ratings that FDA’s information technology (IT) infrastructure generally receives from IT professionals, one wonders how long it will take the agency to beef up its computer systems to allow the agency to sort through such a large volume of data.