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Note from Hugh

Medicare Weekly Update, April 17, 2007

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On April 13th, CMS released its proposed Inpatient Prospective Payment System changes for 2008. According to the news release that accompanied the proposed rule's display copy, CMS is moving forward with plans to replace the current DRG system with 745 new severity-adjusted DRGs.

Under the new system, the overall payment amount to all hospitals would not be reduced, but some hospitals would be adversely affected if they serve patients that are less severely ill. In particular, the rule is designed to reduce payment incentives to specialty hospitals, who according to CMS may select to treat only the "healthiest and most profitable patients." However, some hospitals that see less acutely ill patients due to the more limited nature of their services (i.e. more severely ill patients are transferred) may also be caught in these reductions.

Other proposed changes include a reduction in payment for nosocomial infections, a slight reduction in the outlier threshold, changes to capital payment add-on factors, requirements for reporting additional quality measures, notice requirements for specialty hospitals, and a reduction in payment for reduced or no-cost devices similar to the Outpatient Prospective Payment System.

As always, all hospitals should carefully consider the impact to them and make comments individually, or through associations to which they belong, if appropriate. Hospitals should also make plans to tune in to CMS' Hospital Open Door Forum on April 19, where these changes are sure to be discussed. The Open Door Forum is at 2:00 p.m. EDT and the dial-in number is 800/837-1935. Use 8470101 as the conference ID.

A replay of the call will be available for three days for those who are unable to dial in to the call. For the replay, dial 800/642-1687 and use 8470101 as the conference ID.

~ Kimberly Anderwood Hoy, Esq.

Editor's Note: Kimberly Anderwood Hoy, director of Medicare and compliance for HCPro, Inc., is the author of this week's "Note from Hugh" in Mr. Aaron's absence.

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