Johnson lines up with healthcare groups on hospital payments

Healthcare interest groups seeking to sway the Centers for Medicare and Medicaid Services (CMS) as it considers major changes to hospital payments have gained a powerful ally in Rep. Nancy Johnson (R-Conn.).

Healthcare interest groups seeking to sway the Centers for Medicare and Medicaid Services (CMS) as it considers major changes to hospital payments have gained a powerful ally in Rep. Nancy Johnson (R-Conn.).

Monday marked the deadline for interested parties to offer formal comments to CMS on a massive new regulation that would overhaul the system used to calculate how much Medicare pays for treatments performed in hospitals.

Although the pending regulation is targeted primarily at the hospitals themselves, the industry has not been the staunchest opponent of CMS’s plans. The agency published a draft version of the regulation modifying the so-called inpatient hospital prospective payment system, or IPPS, in April.

Instead, medical-device manufacturers, led by the Advanced Medical Technology Association (AdvaMed), have been the most ardent critics of the regulation and have begun to roll out a campaign to persuade Congress to step in if the Medicare agency moves forward with its plans in their current form.

AdvaMed says the numerous technical changes in the regulation would limit patients’ access to new medical technologies that cost more than old ones but can be more effective.

The device industry has been the loudest voice demanding that Medicare go back to the drawing board and postpone implementing the regulation for one year. The American Hospital Association, the Society of Thoracic Surgeons and others also have urged CMS to hold off for a year.

The hospitals industry has generally supported the Bush administration’s desire to update the system to set payments more accurately but also views the regulation skeptically.

In a letter written to CMS Administrator Mark McClellan, Johnson, who chairs the Ways and Means Committee’s Health Subcommittee, echoes some of the central complaints of the device makers and hospitals.

According to her letter, Johnson strongly supports the concepts behind the proposed regulation but wants the agency to rethink the way it tries to target Medicare’s money more efficiently.

“Although the proposed rule is an improvement over the current system and moves in the right direction, there are concerns that need to be addressed,” Johnson writes.

The complex, 478-page regulation contains many technical but substantial changes to the payment system, which has not undergone major reconsideration since 1983.

But the essence of the regulation lies in CMS’s plans to shift the basis for setting its payment rates by considering the cost of treatments rather than the amount hospitals charge for them. CMS also proposes to set higher payment rates for complicated services performed on more severely ill patients.

The regulation would make these changes successively, rather than concurrently, to the consternation of the device makers and hospitals — and Johnson.

Medicare categorizes hospital services, and their payment rates, through “diagnosis-related groups” (DRGs). Every service has its own DRG, based on the base charge hospitals set to perform a service, which is typically higher than government programs or private insurance companies actually pay.

Johnson complains that CMS’s intention to shift to cost-based rates separately from adjusting them for severity over a two-year period will prove disruptive for many hospitals. “The two-step approach that has been proposed will create erratic swings in reimbursement year-over-year,” the letter says.

She stops short, however, of joining the providers in calling for a one-year postponement and instead recommends that CMS find a way to phase in both sets of new policies gradually.

Johnson also backs up one of the device and hospital industries’ chief complaints, that the cost information that would be used to set the payments is too old and unreliable to be useful.

The device makers say that old data about costs do not accurately reflect the costs of new technologies, a point Johnson strongly makes in her letter to CMS. “Given the pace of the evolution of medical practice, we simply must have access to more timely information,” she writes.

In addition to being old, the cost information that Medicare would use might not even be correct, Johnson writes.

She saves her strongest criticisms of the regulation, however, for the process by which it was written. Echoing a common lament among healthcare interest groups, Johnson complains that CMS developed the regulation in too opaque a fashion.

Healthcare providers and the Congress were not given a full accounting of how CMS would determine the relatively higher and lower rates based on the severity of a patient’s condition, Johnson complains. “Anything less than immediate public disclosure of this information and complete transparency is unacceptable,” the letter states.