In a letter to CMS head Mark McClellan, the chairman of MedPAC emphasized the importance of implementing all four of MedPAC’s recommended changes to the inpatient prospective payment system in 2007, rather than waiting until FY08 to adjust IPPS payments for severity, as CMS intends to do. Glenn Hackbarth’s letter said “implementing all four of our policy recommendations in a budget-neutral manner would entail a small (1 to 2 percent) change in payments for most categories of hospitals. The one exception would be physician-owned specialty hospitals”—which would see significant decreases in inpatient payments. Delaying the severity adjustment “would leave some payment distortions in place, thereby continuing to favor some kinds of patients over others.” The four changes MedPAC recommended to the PPS were cost-based weights, hospital-specific relative values, improved severity adjustment, and DRG-specific outlier financing.
