Congress may have hightailed it out of Washington in August for its traditional month-long summer recess, slowing the legislative pace to a crawl, but the regulatory and reimbursement wheels keep turning. The Centers for Medicare & Medicaid Services (CMS; Baltimore) said early last month that acute-care hospitals that report selected quality data will receive a 3.7% increase in payment rates for inpatient services, 0.5% above the market basket projected in the proposed rule published last May.
Aggregate payments by CMS to inpatient pros-pective payment system (IPPS) hospitals in FY06 are expected to increase by $3.3 billion compared to those for fiscal 2005.
The new rule also reduces the outlier threshold to $23,600 in 2006 from $25,800 in 2005. The threshold determines how much a hospital’s costs for a particular case must exceed the diagnosis-related group (DRG) payment, before extra payments will be made for the case. As a result of the lower threshold, it will be easier for hospitals to qualify for additional payments in 2006.
The rule also includes important changes to the DRGs, which serve as the basis for the payment rates under IPPS, particularly improvements in accuracy of cardiac DRGs. The final rule also revises the payments for long-term care hospitals, which are paid under a separate prospective payment methodology.
Only hospitals that participate in Medicare’s quality reporting initiative will receive the full 3.7% increase. CMS said it expects a majority of acute care hospitals to participate in the quality reporting program in 2006. In order to receive the full payment for FY06, hospitals must correctly abstract and report clinical data on 10 quality measures relating to the treatment of heart attack, heart failure and pneumonia cases for two consecutive calendar quarters.
CMS reviewed hospital data submissions and determined that nearly all hospitals were able to meet the quality standards being adopted in this final rule. Many hospitals now are reporting 17 quality measures for these three conditions, the agency said.
The final rule also revises nine cardiovascular surgery DRGs that account for more than 700,000 Medicare discharges per year. The changes announced in the final rule will differentiate cardiac surgery patients based on whether they have a “major cardiovascular condition.” According to CMS, the changes represent a significant improvement in accuracy of the cardiac DRGs. As CMS noted in its report to Congress on specialty hospitals in May, CMS is completing a comprehensive analysis of potential changes in cardiac DRGs for implementation by FY 2007.
Payment for certain physician services cut
CMS said it expects to pay about $56.5 billion to 875,000 physicians and other healthcare professionals in 2006, according to a proposed rule released Aug. 1 that would update payment rates and revise payment policies under the Medicare Physician Fee Schedule. The proposed rule would expand Medicare coverage of glaucoma screening; expand access for rural beneficiaries enrolled in Medicare Advantage plans to services of federally qualified health centers; and reform payment for multiple imaging procedures performed on a beneficiary at one session.
The proposed rule, however, also says that payment rates per service for physicians’ services would be reduced by 4.3% for 2006, a reduction required by a statutory formula that takes into account substantial growth in overall Medicare spending in 2004, CMS said. The physician fee schedule specifies payment rates to physicians and other providers for more than 7,000 healthcare services and procedures, ranging from simple office visits to complex surgery. The fee schedule is updated on an annual basis according to a formula specified by statute.
The formula requires CMS to adjust the update up or down depending on how actual expenditures compare to a target rate, called the sustainable growth rate or SGR. The SGR is then calculated based on medical inflation, the projected growth in the domestic economy, projected growth in the number of beneficiaries in fee-for-service Medicare, and changes in law or regulation.
The proposed rule provides for expanding the screening glaucoma benefit to include Hispanic-Americans age 65 and older because they are identified as an ethnic group at high risk for the disease. This benefit currently is limited to individuals with diabetes, those with a family history of glaucoma, and African-Americans age 50 and older.
Prompted by recommendations made to Congress by the Medicare Payment Advisory Commission, CMS is proposing a reduction in payments for certain diagnostic imaging procedures to reflect their limited additional costs when they are performed on contiguous body parts in the same session with the patient.
CMS claims that because these changes are made in a “budget-neutral manner,” the lower payments for multiple diagnostic imaging services will allow higher across-the-board payments for other services under the fee schedule.
Preventive health program unveiled
CMS also unveiled plans for a new program called Medicare Health Support, intended to help beneficiaries with diabetes and congestive heart failure (CHF). Eight Medicare Health Support pilot programs will be offered this year in different areas of the country as free, voluntary programs, for around 160,000 fee-for-service Medicare beneficiaries for three years.
“Because early intervention is tremendously important in treating chronic illnesses, we are providing beneficiaries additional tools to help them manage their health more effectively and avoid preventable complications,” said Mike Leavitt, secretary of the Department of Health and Human Services.
Chronic diseases often are the underlying cause of illness, disability and death and account for the majority of Medicare expenditures.
For example, about 14% of Medicare beneficiaries have CHF among their chronic conditions, and they account for 43% of Medicare spending. About 18% of Medicare beneficiaries have diabetes, accounting for 32% of Medicare spending.
Part of CMS’s recent quality initiative has been a focus on better health maintenance, shifting the program from paying for purely responsive care and the associated excessive costs.
Participation in the health support program will be voluntary and will not affect beneficiaries’ Medicare coverage, their access to medical services or their ability to choose their own doctors and other healthcare providers, CMS said.
Medicare Health Support programs will offer self-care guidance and support to chronically ill beneficiaries to support self-management, adherence to plans of care and ensure that they know when to seek necessary medical care necessary.
The specific types of quality improvement and cost reduction strategies to help beneficiaries with chronic illnesses including tracking and reminding participants and their doctors about preventive care needs, use of health information technology to give physicians timely access to their patients’ information, and home monitoring equipment to track participant health status.
The program is being launched at specific facilities in the District of Columbia, Maryland, Oklahoma, Pennsylvania, Mississippi, Georgia, Illinois, Florida, Tennessee and New York.
National HIT network may cost $156 billion
A panel of healthcare and technology experts said a $156 billion capital investment would be needed for a national health information network and the five-year cost would represent almost 2% of annual U.S. healthcare spending. In addition to the $156 billion price tag, achieving a “desirable, workable” network also could add up to $48 billion in annual operating costs, according to a new study released by healthcare research firm The Commonwealth Fund (New York).
The estimates were developed by a panel of experts, including David Brailer, MD, national coordinator for health information technology at the U.S. Department of Health and Human Services, and Janet Corrigan, formerly of the Institute of Medicine and now president of the National Committee for Quality Health Care.
“A national health information network is crucial to achieving a U.S. healthcare system that provides safe, effective, affordable, and accessible healthcare to all Americans,” said Karen Davis, president of Commonwealth. “This cost estimate is an important step towards realizing the goal of a truly high performance health system.”
Findings from a Commonwealth Fund survey of physicians and their use of IT, published in “Medscape General Medicine” in December, revealed that start-up costs was the primary hurdle for physician adoption of IT, named a “major barrier” by
56%, and lack of uniform standards was second, with 44% of physicians saying it was a major barrier. The survey of 1,837 physicians found that practice size plays a role, with physicians in solo and smaller practices more likely to cite barriers to IT adoption. Just 13% of physicians in solo practice said they use electronic medical records, compared with 57% of physicians in practices of 50 or more physicians.
Medical error system passed in Congress
A national system for reporting medical errors moved swiftly through both houses of Congress and President George Bush signed it into law in late July. The Patient Safety and Quality Improvement Act is intended to facilitate the reduction of medical errors and improve patient safety through a national database of health and disease information.
Healthcare officials would voluntarily report medical errors to patient safety organizations, which would use a network of computer databases to analyze the information and make recommendations on ways to improve healthcare. The information would be treated as privileged and confidential.
Similar legislation passed last year, but the session ended before a final agreement could be reached. This time, the House and Senate bills were identical, so the bill only needed the president’s signature before becoming law. The House approved the bill July 27 on a vote of 428-3. The Senate approved the measure the previous week.
Increased reporting of errors would make it easier to identify harmful trends and find solutions, according to healthcare officials. Some feel that the current environment punishes openness because reporting could lead to the loss of credentials or a lawsuit. The Congressional Budget Office estimates that the operation of the data collection system will cost about $58 million over the next five years.
House passes medical liability bill
The House of Representatives passed medical malpractice legislation in late July that would limit awards in lawsuits for pain and suffering to $250,000. The bill would not limit economic damages for lost wages or medical expenses. Called the “Help Efficient, Accessible, Low-Cost, Timely Healthcare Act,” or HEALTH, the bill was approved 230 to 194. It now moves to the Senate for action. The House has approved malpractice reform legislation before, only to see efforts stall in the Senate.
The bill also would limit lawyers’ fees on a sliding scale, based on the size of the award. It would impose a three-year statute of limitations in most cases and would also have a higher threshold for awarding punitive damages.
Proponents of the legislation say rapidly increasing insurance premiums are forcing doctors, especially in high-risk specialties such as obstetrics and neurosurgery to stop practicing medicine. Critics, mostly Democrats, say the $250,000 awards cap is arbitrary and that the limits don’t always work. Many states already have award caps in place. Democrats also predicted that the bill would help make the insurance business more profitable but wouldn’t necessarily bring doctors any economic relief and may well harm patients.
President Bush praised the House for its latest stab at malpractice reform, and said the nation’s liability system is “badly broken,” with frivolous lawsuits driving up costs and threatening access to care. “The medical liability crisis is driving up healthcare costs through higher insurance premiums, higher medical bills, and the practice of defensive medicine,” Bush said. “This crisis also is imposing substantial costs on the federal government and all taxpayers who bear the cost of Medicare and Medicaid.” He called upon the Senate to pass liability reform legislation when it returned from the August recess.
“The liability system diverts billions of dollars from patient care to legal expenses and drives healthcare professionals from their practices,” Stephen Ubl, president of the Advanced Medical Technology Association (Washington), said in a statement. “We believe that our healthcare system needs to focus its spending on the delivery of healthcare, not legal costs and defensive medicine.”
Nasdaq market debuts new healthcare index
Along with launching a new indexing platform, the Nasdaq Stock Market in early August introduced a new index, the Nasdaq Healthcare Index, in response to demand for such an index, it said. “People asked for it,” said John Jacobs, executive vice president of Nasdaq Financial Products. “We’ve had great success with the Nasdaq Biotechnology Index, which has a number of financial instruments and great visibility into the marketplace. But that’s biotech and pharma. A lot of healthcare companies have asked for a broader index, a broader benchmark, and since we now have the capability to do that, we did it.”
A market value-weighted index, the new healthcare index contains Nasdaq-listed companies classified as part of the biotechnology, health/medical device or pharmaceutical sectors. That designation stems from FTSE – a global company classification database.
The group includes biotech and pharmaceutical companies, as well as medical equipment and supplies, health maintenance organizations, hospital management and long-term care and other healthcare firms. Roughly 15% of the 540 or so firms listed are specifically in the medical device sector (see sidebar, p. x, for sampling of companies). “There’s always a level of interest in biotechnology, pharma and healthcare,” Jacobs told The BBI Newsletter’s sister publication, BioWorld Today. He added that the new index allows investors to diversify across all three sectors “because they certainly don’t all move in the same direction at the same time.”
Traded under the symbol IXHC, the new index debuted with a base of 200.00. Its value soon after climbed to 216.05 and included more than 540 companies. Going forward, that number is likely to change daily as no firms are screened out – it contains the biggest to the smallest. “There’s baseline interest,” Jacobs said, “but we’ve seen anecdotally increased interest in requests for this index, and requests for other ways to look at the biotech index.”
Its securities are evaluated semi-annually, and those currently within the index must meet maintenance criteria of $100 million in market capitalization and 50,000 shares average daily trading volume. Those not meeting such criteria are retained, provided that such security met the criteria in the previous semi-annual ranking, while securities not meeting the criteria for two consecutive rankings are removed. Changes occur every May and November, using March and September closing price and volume data as well as April and October publicly available total share outstanding data.
Criteria for a public listing on the Nasdaq exchange in general is different. Nasdaq’s Biotechnology Index is calculated under a modified capitalization-weighted methodology. “If an index starts becoming popular and people follow it, then they start looking to see who’s in that index, so that leads to the visibility aspect,” Jacobs said. “Second, if it gets to the point of the Biotechnology Index, which has actual financial products, it can lead to direct and in-direct investments.”