AHA: 'severely underfunded' system can't absorb steep cuts to Medicare

AHA News

The Centers for Medicare & Medicaid Services’ (CMS) plan to decrease hospital inpatient Medicare payments by $22 billion over 10 years could spell disaster for the health care delivery system, the AHA is warning. The cuts are contained in CMS’ FY 2010 inpatient prospective payment system proposed rule, which was issued May 1.

“These cuts go well beyond what is appropriate and completely disregard the fact that Medicare margins are at an all-time low and continue to fall,” said Don May, the AHA’s vice president for policy.

He said that now is not the time to further reduce hospital payments, citing the ailing economy and data from the Medicare Payment Advisory Commission that show hospitals’ Medicare margins will drop to a record low 6.9% in FY 2009. In other words, for every dollar spent caring for Medicare beneficiaries, hospitals only will recuperate about 93 cents.

Under the proposed rule, hospitals that submit data on 43 quality measures would receive a market-basket update of 2.1% for FY 2010, but that would all but be wiped out by a 1.9% “behavioral offset” cut as part of the implementation of the new Medicare-Severity Diagnosis-related Group classification system. CMS claims the cut is to eliminate the effect of coding or classification changes it says do not reflect real changes in case-mix.

When coupled with other proposed policy changes – including the statutory elimination of Section 508 reclassification and budget neutrality adjustments – hospitals, beginning in October, would receive Medicare inpatient payments that are 0.5% below what they are reimbursed today.

“Hospitals simply cannot sustain these cuts in an already severely underfunded system, especially in this current economic environment,” said May.

In the proposed rule, CMS also announced its intention to proceed with eliminating teaching hospitals’ indirect medical education (IME) capital adjustment for FY 2010 and beyond once a moratorium put in place by the American Recovery and Reinvestment Act expires Oct. 1. Teaching hospitals stand to lose $350 million in FY 2010 alone.

“CMS’ decision ignores how vital these capital payments are to investments in the latest medical technology, ongoing maintenance and improvement of hospitals’ facilities and medical education,” said May.

A bipartisan group of House and Senate lawmakers oppose the elimination of the capital IME adjustment and soon are expected to call on the Obama administration to permanently withdraw its plan for cutting teaching hospitals’ payments.

CMS also proposed revising the way it calculates payments for critical access hospitals (CAH), which will result in cuts for CAHs that elect to be reimbursed for outpatient facility services under the “optional method.” CMS would reduce their reimbursements from 101% of the reasonable costs for outpatient facility services to 100% of reasonable costs. AHA staff are analyzing the impact of CMS’ proposal.

Included in the May 1 proposed rule was a separate 2.8% payment increase for long-term care hospitals (LTCH) for FY 2010.

CMS is accepting comments on the inpatient and LTCH PPS proposed rule through June 30, and will issue a final rule no later than Aug. 1.

The table below is from a recent AHA survey, “The Economic Crisis: The Toll on the Patients and Communites Hospitals Serve.” It helps illustrate the challenges hospitals face in today’s tough economic environment. For more on the survey, go to the “Research and Trends” section of www.aha.org.


Topic: Advocacy and Public Policy

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