Hospitals and medical device makers have escaped deep cuts that had been proposed by Medicare for procedures such as implanting drug-eluting stents, defibrillators, and pacemakers.
The fiscal 2007 Inpatient Prospective Payment System final rule “is the most important reform for hospital payment in decades,” said Centers for Medicare and Medicaid Services (CMS) Administrator Mark McClellan at a press conference sponsored by CMS.
The rule marks a return to a cost-based system, but no longer contains the drastic cuts first proposed for many procedures—33% for drug-eluting stents, 24% for implantable cardioverter defibrillators (ICDs), 15% for pacemakers, and 28% for ablations.
As such, it marks a victory of sorts for physicians' and hospital organizations and medical device makers. Such groups had voiced concern that the rule, as first proposed, would likely reduce access to many cardiac and orthopedic procedures because the reductions in reimbursement were so severe.
The American Hospital Association and the Federation of American Hospitals worried that the impact would be too much too soon, and—along with the medical-device industry group AdvaMed—called for at least a 1-year delay in implementation of the rule.
During the press briefing, Dr. McClellan said that CMS did not feel a delay was necessary. The agency took everyone's concerns into account, and instead decided to phase in the changes first proposed in April, he said.
Overall, Medicare will increase payment rates by 3.5% on average, for an increase of $3.4 billion. Cardiac specialty hospitals will receive a slightly lower boost—1.2% on average—in an effort to make payments more accurate, according to CMS.
And, answering critics, CMS will use cost reports from fiscal 2004—instead of fiscal 2003—for its 2007 payment calculations. Surgeons and device makers had noted that some devices, such as drug-eluting stents, had just barely hit the market in 2003.
The agency also is embarking on an overhaul of the diagnosis-related groups by creating 20 new DRGs and modifying 32 existing DRGs in 2007 to more accurately adjust for patients' severity of illness. By 2008, CMS hopes to have a new severity evaluation method; it is seeking input from outside contractors starting in September, said Dr. McClellan. After a report, the agency will take public comment before making changes for 2008.
Finally, hospitals that report on the 20 Hospital Quality Alliance-approved quality measures to the agency for posting on its Hospital Compare Web site will receive a full market basket increase in their payment rates.
Hospital and physician groups reacted positively. “We're gratified actually by the changes that have been made in the final rule,” said Dwight W. Reynolds, president of the Heart Rhythm Society, in an interview. For example, ICDs are scheduled for only a 2% cut in 2007, compared with 24%. Further, the society is more comfortable with how payments are being calculated: “No one likes to see reductions, but these are much more manageable for the hospitals than the ones proposed in the draft.”
AdvaMed also pronounced itself gratified, especially with the phase-in, according to a statement by president and CEO Stephen J. Ubl.
The rule addressed most of the AHA's concerns, but the organization was not entirely satisfied, said Rick Pollack, executive vice president, in a statement. “While we continue to believe a 1-year delay is needed given the rule's complexity, we are committed to working with CMS to ensure any needed changes are addressed in future years.”