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CMS proposes significant revision to IPPS

Patient Financial Services Weekly Advisor, May 12, 2006

Last month, the Centers for Medicare & Medicaid Services (CMS) announced a proposed rule that would lead to the first significant revision of the Inpatient Prospective Payment System (IPPS) since its inception in 1983.

The revised plan, which CMS plans to roll out completely by fiscal year 2008 at the latest, would improve the accuracy of payment rates for inpatient stays by basing the weights assigned to Diagnosis Related Groups (DRGs) on hospital costs rather than charges, and adjusting the DRGs for patient severity. This would eliminate biases in the current DRG system arising from the differential markup hospitals assign for ancillary services among the DRGs.

CMS plans to start applying the new DRG weights on October 1, 2006.

CMS also plans to replace the current 526 DRGs with either the proposed 861 consolidated severity-adjusted DRGs or an alternative. CMS hopes to achieve this by fiscal year 2007.

Payments to acute care hospitals would increase by $3.3 billion. Over 1,000 hospitals in rural areas would see an average increase of 6.7%, according to CMS.

To access the proposed rule, click here.

The comment period ends on June 12. To comment on this proposed rule, click here.

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