Hospitals received an early holiday gift from the Centers for Medicare & Medicaid Services (CMS; Washington) shortly before Christmas with announcement of a change in the lengthy process it uses to adjust payments that are too low for services covered by Medicare. "By looking at payments that are known to be inherently reasonable, the regulation will benefit both the Medicare program and the people it serves," CMS administrator Tom Scully said. "Where payment rates are too high, we will be able to save money and lower co-payments for beneficiaries. Where our payment rates are too low, we will have the flexibility to increase what we pay, making these items and services more available to more people."
The new interim rule, published in the Dec. 13 Federal Register, will take effect Feb. 11, following the customary comment period. The newly streamlined process for payments deemed too high or too low termed "inherently reasonable" by CMS will apply to all part B service, except those under the physician fee schedule, the prospective payment system or outpatient hospital or home health services. Items included in the new rule, however, are durable medical equipment and clinical laboratory services.
The "inherent reasonableness" rule was adopted following the Balanced Budget Act of 1997 when Congress determined that existing mechanisms under the Health and Human Services Secretary's purview were inadequate. The law limits adjustments up to a 15% increase or decrease in any year. Local and regional contractors who act as Medicare payors must submit any proposed adjustment to CMS as part of the new process. The adjustments cannot be imposed until CMS notifies the contractor that the proposed adjustment has been received. The provision will ensure that "full consideration is given to pertinent factors before limitations are set locally," the agency said.
The change was hailed by the Advanced Medical Technology Association (AdvaMed; Washington), which, along with the General Accounting Office, earlier made recommendations to CMS for improving the process. AdvaMed said it was pleased that the rule sets what it called an "objective" 15% threshold for determining if payment rates are excessive or deficient. The threshold will improve the predictability of the process, the organization said following the announced change. However, it said that even stronger protections are still needed and should be put in place to ensure accurate adjustments.
AdvaMed said CMS should establish clear procedures to ensure that local or regional Medicare carriers announce proposed payment adjustments. Further, the carriers should explain the methods used to make the adjustment determinations and allow providers or contractors to comment on the proposals, the organization suggested.
Leahey replaces Holden at MDMA
A change in leadership at the Medical Device Manufacturers Association (MDMA; Washington), announced last month, could signal a renewed focus on business practices of group purchasing organizations (GPOs). MDMA board chairman Paul Touhey announced that Mark Leahey, the association's director of federal affairs, has been appointed executive director of the association. Larry Holden, the former executive director, resigned "to pursue other opportunities," said Touhey, who is senior vice president of Fujirebio Diagnostics (Malvern, Pennsylvania). "Mark Leahey brings valuable, relevant experience to the challenges and issues facing MDMA," Touhey said in announcing the leadership change.
In the same announcement, Touhey focused on the issue of GPOs as a key priority for the MDMA, saying that Leahey "in the coming months ... will continue to ensure that manufacturers have open access to the hospital marketplace by challenging the exclusionary and anti-competitive nature of large group purchasing organizations."
Earlier this year, MDMA played a vocal role in criticizing the business practices of large GPOs. The group argued before a Senate subcommittee that current practices among GPOs were exclusionary and prevented smaller medical device companies from accessing the hospital marketplace. MDMA tends to represent smaller med-tech firms attempting to break into new markets.
Besides citing the issue of GPOs, Touhey pointed to other key industry issues to be worked on by Leahey. He said Leahey "will focus on the implementation of the Medical Device User Fee and Modernization Act, work with the Centers for Medicare & Medicaid Services and Congress to ensure that medical device technology is reimbursed at adequate rates, and challenge any policies that would have an adverse effect on patient care or the innovative companies who serve those patients."
When selected to head the MDMA in October 2001, Holden was billed as a legislative "insider" skilled at lobbying congress staff. Leahey's credentials tend to be more on the legal side. He is a member of the American and Massachusetts bar associations and several healthcare organizations.