June 12, 2006
Mark McClellan, MD, PhD
Administrator
Centers for Medicare & Medicaid Services
Attention: CMS-1488-P and P2
Room 445-G, Hubert H. Humphrey Building
200 Independence Avenue, SW
Washington, DC 20201
RE: CMS-1488-P, Medicare Program; Proposed Changes to the Hospital Inpatient Prospective Payment Systems and Fiscal Year 2007 Rates; Proposed Rule.
and
CMS–1488–P2, Medicare Program; Hospital Inpatient Prospective Payment Systems Implementation of the Fiscal Year 2007 Occupational Mix Adjustment to the Wage Index; Proposed rule.
Dear Dr. McClellan:
The Healthcare Financial Management Association (HFMA) is pleased to submit, on behalf of our many members who are involved in the financial management of hospitals, the following comments regarding the proposed Medicare inpatient prospective payment system (PPS) regulations (CMS-1488-P) and the proposed rule on the inpatient PPS implementation of the FY07 occupational mix adjustment to the wage index. The rules were published in the April 25, 2006, and May 17, 2006, Federal Registers, respectively.
HFMA is the professional membership organization for individuals involved in the financial management of health care. HFMA's more than 34,000 members work in a variety of healthcare settings.
The inpatient PPS FY07 rule proposes the most significant changes in the calculation of diagnosis-related group (DRG) relative weights since DRGs were adopted. It would create what is being called cost-based weights using a newly developed hospital-specific relative values cost center methodology (HSRVcc). The rule also proposes expansion of the DRG system into consolidated severity adjusted DRGs (CS-DRGs) to account for patient severity and suggests such refinements could occur in FY08, “if not before.”
We have serious concerns about the proposed changes to the DRG weights and classifications. While we believe CMS and HFMA share a common goal of refinements to the Medicare payment systems that will make for fairer and more equitable payments, our experience educating healthcare professionals tells us that even with perfect changes to the DRG-based system, more time is needed to understand not only the direct financial effects of such significant proposed policy changes, but the many ramifications of the changes throughout hospital organizations.
CMS is receiving comments from the American Hospital Association, the Federation of American Hospitals, and the Association of American Medical Colleges, based upon significant research performed on their behalf. That research and analysis addresses such concerns as the instability of the impact of the proposed changes, that small changes in methodology could lead to large changes in hospital payment, and that the validity of CMS’ proposals versus potential alternatives to improve the DRG weights and classification system is uncertain. We echo those concerns and urge your attention to that research.
HFMA asks that the following be part of the final inpatient PPS rule:
Additional study of the need for a new classification system.
HFMA believes additional understanding of the variation within DRGs and the capabilities of a classification system that will effectively address such variation is still needed before changes of the magnitude being proposed are put in place.
Delay cost-based weighting by at least one year. While we support moving to a DRG-weighting methodology based on hospital costs rather than charges, we also believe the system should be simple, predictable, and stable over time. The PPS should also provide clinically cohesive and meaningful DRGs that are somewhat intuitive for providers and coders to follow, and that reflect similar resource use within DRGs. And, ultimately, the inpatient PPS should foster innovation and best practice in care delivery. The research and analysis undertaken for AHA, FAH, and AAMC found errors, inconsistencies, and flawed HSRVcc methodology that indicate more work and time is needed to determine the best way to create cost-based weights, develop a sound methodological approach, and to understand their potential impact. In addition, there should be analysis of proposed changes to clearly show they result in an improved system.
HFMA sees a clear need for not less than a one-year delay, regardless of version of the proposed DRG changes, given the serious concerns with the HSRVcc and CS-DRG methodology, and appropriate consideration to the substantial education and training efforts the proposed changes would require.
Simultaneous adoption of changes to the weights and classifications. HFMA supports the conclusion from the research commissioned by the AHA, FAH, and AAMC that if the need for a new, more effective classification system is demonstrated and developed, it should be implemented simultaneously with the new weighting system. Such implementation would provide better predictability, smooth the volatility created by the two, generally off-setting, changes and permit the training process to engage the logic of both changes.
A three-year transition. When, adopted, weighting changes and refined DRGs should be implemented over a three-year transition period, given the magnitude of payment redistribution across DRGs and hospitals, and the extensive training the changes will entail.
We also have concerns about the proposed occupational mix rule. As a result of the decision handed down by the U.S. Court of Appeals for the Second Circuit on April 3 in Bellevue Hospital Center v. Leavitt, CMS on May 12 released a proposed rule revising the occupational mix adjustment portion of the FY07 inpatient PPS proposed rule. The court ruling requires CMS to collect new data on the occupational mix of hospital employees and fully adjust the area wage index (AWI) for FY07. Care must be taken to prevent the errors that can result from compressing a lot of work into a limited amount of time.
HFMA urges CMS to:
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Allow hospitals to turn in both calendar quarters of data in August hether they are submitting for the first time or with corrections.
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Take comments on the calculations after the initial results of the survey are tabulated and posted, and publish the occupational mix adjustment changes as an interim-final rule in August with an associated comment period.
Finally, HFMA takes this opportunity to note what appears to be an oversight in data manipulation pertaining to the wage index. CMS eliminates the critical access hospital (CAH) data from the wage index file it uses to compute the national average hourly wage (NAHW). Since CAHs have lower average hourly wages (AHWs) than the average PPS hospital, the elimination of their data produces an overstated NAHW. This artificial increase is included in the negative budget neutrality adjustment that consequently reduces payments and results in the national inpatient PPS operating payments being understated by an estimated $1.52 billion over five years (2003-2007). We call upon CMS to apply a positive budget neutrality adjustment in FY07 to compensate for the underpayments.
HFMA takes pride in its longstanding ability to provide technical expertise to Federal agencies. We hope that these comments prove useful.
We would welcome the opportunity to provide further assistance with these issues. Please do not hesitate to call on me at (202) 296-2920.
Sincerely,
Richard L. Gundling, FHFMA
Vice President