Lawmakers question reimbursement cuts

The 2.4 percent rate reduction in CMS’s IPPS Proposed Rule is raising concerns among members of Congress. In a letter sent May 3 to CMS acting Administrator Leslie V. Norwalk, 23 U.S. senators expressed their disapproval, stating that "these draconian cuts in reimbursements, which are based on conjecture, will impose an added burden on all hospitals."

A separate letter signed by 77 U.S. representatives and sent to Norwalk on May 4, stated that there is no legal mandate or precedent for making reductions of "this magnitude -- without any empirical evidence of actual and measurable changes in coding."

CMS is proposing the 2.4 percent rate reduction as a "behavioral offset" in anticipation of hospitals improving their coding and documentation as they implement MS-DRGs. The Proposed Rule also eliminates the annual update of capital payments for hospitals in urban areas. The American Hospital Association estimates that over five years these cuts will result in a $24 billion reduction in reimbursements and nearly a $1 billion cut in capital payments.

The criticisms within the letters focus only on the reimbursement cuts, but do not question the need for severity adjustment. Both letters argued that the rate cut is unwarranted because "hospitals are already experts in coding for payment; they have little ability to change their coding and classification practices." CMS contends that the reduction is necessary to offset the greater use of coding to earn higher reimbursements -- specifically coding complications and co-morbidities -- as hospitals move to the new system. However, an analysis performed by several hospital organizations of Medicare claims from 2001 to 2005 suggests that more than 70 percent of claims already included coding for complications and co-morbidities, which makes the behavioral offset unnecessary.

The Senate letter was drafted by Sens. Ken Salazar (D-Colo.) and Pat Roberts (R-Kan.), and can be accessed by clicking here.

The House letter was authored by Reps. John Lewis (D-Ga.) and Jerry Weller (R-Ill.) and can be accessed by clicking here.

Ingenix offers an Impact Analysis where hospitals can use their own claims data to analyze the impact of MS-DRG changes. For more information, click here to find out how your organization can benefit from these and other services.