CMS and its IPPS Changes:
It's Not Over Yet

With this inaugural issue of the S-DRG Report I’d like to commend the industry for taking such a strong stand on CMS’ proposed enhancements to the Inpatient Prospective Payment System (IPPS) and emphasize the importance of public comment in the rule-making process. As CMS makes bona fide efforts to improve the system it is often not in touch with the day-to-day concerns and issues relative to operating within the regulatory environment that it creates.

The more than 2,300 comment letters sent to CMS regarding IPPS indicate that the agency struck a nerve among those within the industry. The sheer volume of letters demonstrate the industry’s strong sense of passion about care delivery and the business of health care.

Most importantly, CMS listened. Having assimilated an amazing amount of information is a few short months, CMS responded with a thoughtful and measured plan for further study and incremental improvement. The process worked! But it only worked because of the voice of the industry. And while the high number of comments was an impressive display of unity and concern, it’s not yet time for that passion to dissipate. More challenges are ahead.

Although CMS published its final IPPS rule in August, the agency indicated that is has yet to decide on the casemix system that it will use to implement severity-adjusted reimbursement. In fact, CMS stated in its final rule that it will begin evaluating alternatives to the casemix system that it initially proposed to use. This is a partial victory for the industry, since the casemix system that CMS initially proposed had significant limitations. CMS has since awarded a contract to the RAND Corporation to evaluate alternative severity-adjusted DRG classifications systems. RAND’s evaluation will be used as input to the next proposed rule due in May 2007.

Send CMS Your Comments Before December
CMS is accepting comment regarding casemix system selection and DRG classification issues. Unlike other CMS comment periods that have a firm submission deadline, in this instance, the agency is simply recommending that comment letters be received by early December. This is yet another opportunity to have an impact on the future of the industry by sharing your opinions with CMS. I urge you to send your comments to CMS, and, in doing so, keep the following issues in mind when you share your thoughts:

• System Transparency – Access to the details underlying the system is critical.
• Ease of Implementation – The transition from the current DRG system to the severity-adjusted DRG system must not require substantial retraining or IT work.
• Ease of Operation – The new system can’t impose substantial productivity burdens on the industry.
• Affordability – The new system can’t place a substantial financial burden on the industry to implement and operate.
• Public Comment – The agency must ensure that the adopted methodology is open to public discussion, scrutiny and modification, now and on an ongoing basis.

Discussion Forum
The purpose of this forum is to solicit feedback from interested parties on IPPS now, and other hot PPS issues in the future. Please send in your opinions and concerns and my collegues, Renee Leary, Dean Farley and I will provide insight into how these concerns play into the current and proposed regulatory environment, and try to create a broader discussion with other interested parties. We are particularly interested in hearing from you on what the most important issues are for transitioning to a new IPPS system. Is it statistical performance? Is it ease of transition and operation? Or is it affordability, to name a few. Would you prefer a system that builds on what you already know or a wholesale scrapping and transition to something totally different.

CMS is willing to listen. It’s up to us to be heard.