When Medicare starts paying hospitals based on costs adjusted for patient severity rather than on charges, hospitals may see payments for complex treatments and new technologies cut by 20% to 30%, according to The New York Times. Payments for hip and knee replacements may be cut by 10%, reimbursement for implanting a defibrillator could drop by 23%, and payment for a procedure to open clogged arteries may decrease 33%. Basing Medicare payments on cost rather than charges will start this October, and severity-adjusted payments will begin in October 2007.
Several patient advocacy groups have written to the government, complaining that the new payment system will hurt seriously ill patients, and 200 members of Congress have petitioned for a one-year delay in the use of the payment methodology. Although the new payment system is intended to prevent specialty hospitals from profiting from lucrative procedures, many not-for-profit hospitals will be affected as well. The president of the North Dakota Healthcare Association told the Times that the new payments will cause “random and inequitable” reimbursement among the state’s 52 hospitals. Other critics say payments will not reflect the true cost of care because the government did not factor in new technology in its formulas. The article also discusses concerns that the developer of the new payment system, 3M Health Information Systems, is now advising hospitals to buy its software so that they can easily transition to the new Medicare system.
