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Opinion: The Effects of IPPS Changes
By Blair Childs

In May, the Centers for Medicare & Medicaid Services (CMS) released proposed changes to the hospital inpatient prospective payment systems for acute care hospitals. Below are some key issues that the 2,200 hospital members of the Premier healthcare alliance believe will have a significant impact on nonprofit hospitals.

MS-DRG Documentation and Coding Adjustment
For Fiscal Year (FY) 2010, the CMS has proposed a payment cut of 1.9% to eliminate what it claims is the effect of coding or classification changes that do not reflect real changes in case mix. Considering the state of the economy, as well as declining hospital reimbursements, the CMS was wise to defer the estimated 6.6% in payment cuts that still must be recouped to future years. However, even a limited cut reduces reimbursements to U.S. hospitals by an estimated $22 billion over the next 10 years.

Equally important, the CMS’ conclusion about the reduction in real case mix is inconsistent with data showing an upward trend. Data analysis suggests a shift from elective to emergent cases being admitted to hospitals. During the same period, the average length of stay remained stable, countering the notion that there has been a sudden decrease in acuity. Lastly, analysis shows there was an increase in skilled nursing facility and home health services, while there was a decrease in patients discharged to home or self-care, suggesting that hospitals furnished care to more acute patients during this period.

These indicators should be considered when determining the final payment adjustments in FY 2010 and the future, as they show that it is unlikely the actual case mix decreased in 2008. Further, research shows that a smaller portion of the increase in case mix should be attributable to documentation and coding than the CMS proposed. For this reason, hospital groups have recommended that the CMS only make future adjustments once final data for this period become available and can be analyzed to ensure accuracy.

Capital Payments
In the rule, the CMS reiterated its plan to remove the adjustment to hospital capital payments for the costs associated with teaching residents in FY 2010. If this policy were implemented, hospitals would lose $350 million in FY 2010 and $1.8 billion over 10 years.

Analysis of the capital prospective payment system that is not focused on total payments and total costs is flawed. MedPAC estimates Medicare margins of -6.9% in 2009, meaning that the average hospital loses on every Medicare patient they treat, regardless of whether their capital-only margins are positive. In addition, capital margins are likely to drop, as hospitals will not see an increase in capital payments in FY 2010. Moreover, the CMS does not plan to return the reduced payments to the base but rather remove them from the system, further eroding Medicare margins at a time when they are at historic lows.

Given the financial pressures, hospitals have argued that the CMS should repeal these reductions, which could have a negative impact on the adoption of new technologies such as health information systems, EHRs, and scanning devices that are critical to enhance patient safety and quality of care.

Quality Measures Reporting
Members of the Premier alliance were pleased that the CMS listened to the concerns voiced by the hospital community in last year’s rule and has tempered the number of proposed quality reporting measures for FY 2011. However, hospitals remain concerned that the CMS has proposed 69 new measures pertaining to a range of areas such as stroke, venous thromboembolism, complications of care, healthcare-associated infections, timeliness of emergency care, mortality, surgical care improvement, cardiac, and nursing sensitive care for FY 2012.

Before moving forward with these additional measures, the CMS should ensure they are National Quality Forum endorsed, validated, field tested, and evidence supported. Further, since one of the cornerstones of quality reporting is transparency, all aspects of proprietary measures specifications, collection, and measurement calculation algorithms should be made publicly available prior to inclusion in the program. Failure to do so would create de facto monopolies, as hospitals would be forced to purchase or access these proprietary measures in order to comply with the law.

EHRs
The CMS’ proposed testing of EHR-based submission of measures is a step in the right direction. But the proposal builds on the existing system rather than leveraging EHRs’ potential to improve quality and efficiency. For this approach to be successful, standards need to define key clinical concepts in a way that is transferable and used to measure compliance with evidence-based care.

While this process needs to evolve to achieve this over time, the CMS needs to create a system to accept electronic transmissions from EHRs expeditiously. Thus, hospitals in the Premier healthcare alliance support the testing of electronic submission of a subset of both the stroke and venous thromboembolism measures from EHRs in FY 2010. However, testing the emergency department throughput measure is ill advised, as this information is most often housed in hospitals’ outpatient systems, which may not be linked to their inpatient systems.

— Blair Childs is senior vice president of public affairs for Premier Inc, an alliance of more than 2,200 not-for-profit hospitals and 58,000-plus other healthcare sites working together to improve healthcare quality and affordability.