FY 2010 IPPS: Federales sucker punch the hospital industry

CMS published the FY 2010 IPPS (hospital inpatient prospective payment system) rule and rates on Friday May 22.  I'll offer just some highlights of the 608-page monstrosity here, focusing on the short-term acute care portion; the long term acute care hospital (LTACH) rates are in here, too.

First and foremost: Acute care hospitals will enjoy just a 0.2% increase in DRG payments for the year beginning October 1, 2009.  The rule provides for a 2.1% adjustment for all hospitals reporting RHQPAPU measures (which is virtually everyone); 0.5% if not reporting.  The sucker punch: a 1.9% negative adjustment to adjust for the shift to the severity-adjusted MS-DRG system in FY 2008-09 and the concomitant attention to reporting, which the federales say resulted in higher reimbursements without a change in acuity.  There is a total 8.5% negative adjustment to be made which CMS is deferring so as not to whack the industry excessively just now.  Congress has come to the rescue once, reducing the cuts and deferring the day of reckoning, but that day has now come.  It remains to be seen whether Congress will seek to defeat or defer these cuts again (and again) a la the SGR.  Comments are invited; the AHA and others are already steamed.

One bright spot: orthopedic MS-DRG codes are bucking the trend and see a more significant increase.

A note of caution for hospitals: Even though complete documentation and coding led to the negative adjustment, folks need to continue to do a good job of documentation and coding, since that's what the MS-DRG system is all about.

On the RHQDAPU front: the federales are taking baby steps towards automating the reporting process, testing the transmission system direct from hospital records to a central repository with three measures not currently used for payment incentives.

This year the proposal is to add two new measures to the 44 currently in use (for FY 2011) (see chart in linked Federal Register document, 74 FR 24171-72, pp. 93-94 of pdf) , and 69 additional measures are identified that might be used in the future (74 FR 24172-73, pdf pp. 94-95).  Also interesting is the fact that one measure is being taken off the list based on research tying IV beta blockers to elevated mortality risk in certain populations, and related practice guidelines evolution.  In addition, other measures may come off the list if they've "topped out" with near-universal compliance — like a pneumonia oxygenation assessment measure.  Comments are invited on determining when to retire criteria and also on the criteria for establishing new criteria.  These criteria are significant, so I quote this section of the commentary in full:

In the FY 2009 IPPS proposed rule, we solicited comments on several considerations related to expanding and updating quality measures, including how to reduce the burden on the hospitals participating in the RHQDAPU program and which approaches to measurement and collection would be most useful while minimizing burden (73 FR 23653 through 23654). In the FY 2009 IPPS final rule, we responded to public comments we received on these issues (73 FR 48613 through 48616). We also stated that in future expansions and updates to the RHQDAPU program measure set, we would be taking into consideration several important goals. These goals include: (a) Expanding the types of measures beyond process of care measures to include an increased number of outcome measures, efficiency measures, and patients’ experience-of-care measures; (b) expanding the scope of hospital services to which the measures apply; (c) considering the burden on hospitals in collecting chart-abstracted data; (d) harmonizing the measures used in the RHQDAPU program with other CMS quality programs to align incentives and promote coordinated efforts to improve quality; (e) seeking to use measures based on alternative sources of data that do not require chart abstraction or that utilize data already being reported by many hospitals, such as data that hospitals report to clinical data registries, or all-payer claims data bases; and (f) weighing the relevance and utility of the measures compared to the burden on hospitals in submitting data under the RHQDAPU program. Specifically, we give priority to quality measures that assess performance on: (a) Conditions that result in the greatest mortality and morbidity in the Medicare population; (b) conditions that are high volume and high cost for the Medicare program; and (c) conditions for which wide cost and treatment variations have been reported, despite established clinical guidelines. We have used and continue to use these criteria to guide our decisions regarding what measures to add to the RHQDAPU program measure set.

The goals of the RHQDAPU articulated here bear close reading.  These are core values that CMS is seeking to refine further — comments are welcome — and it seems to me that these core values will continue to inform quality measurement and value based purchasing initiatives of the agency in the future.  The main problem I have with the approach taken to date (and I've been saying this for quite a while) is that the federales — and other payors — are asking providers to track too many indicators.  It is possible to track a small number of indicators that are predictive of other quality performance measures.  (Two key people who agree with this perspective are Don Berwick of the Institute for Healthcare Improvement and Leah Binder of the Leapfrog Group, each of whom I've had the opportunity to talk with about this issue, among other things.)  My other problems with the approach are that too little of the total payment is at stake (2%), and that the system is set up as a pay-for-reporting system, not a pay-for-performance system.     

No new hospital-acquired conditions (HACs) are being added to the no pay for never events rule this year.  A very significant fact was tucked away near the very end of the publication (74 FR 24669; pdf p. 591): The no pay for never events rule is only expected to save the federales $21-22 million a year, because most cases with HACs have other comorbidities that result in higher MS-DRG payments anyway.  Sounds to me like this is a rule crying out to be rewritten:  All the hoo-ha over hospital-acquired conditions and no pay
for never events and the federales are saving just a measly $21 million a year???  Either tighten it up so that real savings can be achieved or toss it.

Update May 26, 2009: And while the hospitals are down, CMS is cutting indirect GME capital reimbursement to nil.  At least one state hospital association sees these changes as leading to layoffs and closures.

There are many more proposed changes and updates in this reg, but the last I'll touch on here is the EMTALA sanction waiver, which would essentially provide a 72-hour waiver of EMTALA (except for patient dumping based on source of payment) in case of implementation of a hospital disaster protocol.  There is, of course, a pandemic infectious disease exception (for all you swine flu eschatologists out there) extending the 72-hour waiver til the end of a declared public health emergency.

The comment period is open through June 30; a final rule is expected by the end of July, and new rules and rates will be effective October 1.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting