Comment Letter on Medicare
Fiscal Year 2000 Hospital Inpatient Prospective Payment System:
Proposed Rule
July 6, 1999
Nancy-Ann Min DeParle, Administrator
Health Care Financing Administration
Room 445-G
Hubert H. Humphrey Building
200 Independence Ave. SW
Washington, DC 20201
Re: File Code HCFA-1053-P
Dear Administrator Min-DeParle:
The Association of American Medical Colleges (AAMC) welcomes
this opportunity to comment on the Health Care Financing Administration's
(HCFA or the Agency) proposed rule entitled "Medicare
Program; Changes to the Hospital Inpatient Prospective Payment
Systems and Fiscal Year 2000 Rates," 64 Fed. Reg. 24716
(May 7, 1999). The AAMC represents over 400 major teaching
hospitals; all 125 accredited U.S. medical schools; 86 professional
and academic societies; and the nation's medical students
and residents. Our comments will focus primarily on the proposed
rule's provisions regarding adjustments to the resident limits
mandated by the Balanced Budget Act of 1997 (BBA). We also
will comment briefly on the proposed changes to the calculation
of the hospital wage index, outlier payments, and hospitals-within-hospitals.
I. GME Changes
As you know, the BBA mandated numerous changes that affect
teaching hospitals and graduate medical education (GME). From
an operational standpoint, the implementation of a limit on
the number of residents associated with Medicare reimbursement,
and related issues, continue to be a source of concern and
confusion within the academic medical community. To that end,
we appreciate HCFA's efforts to clarify and make technical
modifications to the current regulations. In this letter,
the AAMC will comment specifically on three topics raised
in the proposed rule: resident limits for hospitals that did
not reflect resident counts on their 1996 Medicare costs reports,
temporary adjustments to resident limits due to hospital closures,
and Medicare reimbursement for residents training in nonhospital
sites.
A. Hospitals with No Allopathic or Osteopathic Residents
Reflected on Their 1996 Medicare Cost Reports
Under the proposed rule, HCFA would revise the regulatory
requirements to permit hospitals that had no allopathic or
osteopathic residents reflected on their most recent Medicare
cost reports ending on or before December 31, 1996 to establish
resident limits. For each hospital, the limit would be based
on the product of the highest number of residents in any program
year during the third year of the first program's existence
for all new residency training programs and the minimum accreditation
period, not to exceed the number of accredited slots. 64 Fed.
Reg. at 24735.
The AAMC supports this change because it permits all hospitals
to establish a resident limit. Under the current regulations,
hospitals without resident counts reflected on their 1996
cost reports are disadvantaged because they have a resident
limit of zero. The final rule should clarify that HCFA's proposed
change would also apply to those hospitals that may have had
dental or podiatry residents reflected on their 1996 cost
reports, so long as no allopathic or osteopathic residents
are shown.
The AAMC also requests HCFA to confirm in the final rule
that hospitals that did not have allopathic or osteopathic
residents on their 1996 Medicare report ("nonteaching
hospitals"), and participate in resident limit affiliation
agreements, do not forego their opportunities to later establish
new programs and resident limits. A number of hospitals have
executed, or may execute, affiliation agreements with hospitals
that had no allopathic or osteopathic residents in 1996. The
combined aggregate resident count of the involved hospitals
equals the resident limit of the teaching hospital(s) because
the nonteaching hospital has a resident limit of zero. Under
the affiliation agreement, the aggregated count would be distributed
among the signatory hospitals, including the nonteaching hospital.
In verbal discussions with HCFA staff, we have been told that
resident limit affiliation arrangements would not preclude
the "nonteaching" hospital from subsequently establishing
new training programs and its own resident limit. We have
received several inquiries on this issue, and feel it would
be beneficial for HCFA to establish this position in the final
rule.
On a technical level, the proposed rule replaces the current
language in 42 C.F.R. §413.86(g)(6)(i) and (ii) with
"If a hospital had [no] allopathic or osteopathic residents
in its most recent cost reporting period ending on or before
December 31, 1996. . ." However, similar language was
omitted from 42 C.F.R. §413.86(g)(6)(iii). This appears
to have been an oversight.
In addition, the proposed regulatory language includes a
new section relating to rural hospitals participating in affiliated
groups, 42 C.F.R. §413.86(g)(6)(i)(D). However, this
section does not appear to be referenced in the preamble and
its meaning is unclear.
B. Temporary Adjustments to Resident Limits Due to Hospital
Closures
Under the proposed rule, hospitals that take on additional
residents from a hospital that closes any time on or after
July 1, 1996 may have their limits adjusted upward on a temporary
basis to reflect these additional residents. To qualify for
the adjustment, the hospital training the additional residents
would need to submit a request to its fiscal intermediary
(FI) at least 60 days prior to beginning the training of these
residents. The request must identify the displaced residents
and specify the length of time the resident limit adjustment
is needed. After the displaced residents leave the hospital's
training program or complete their residency program, the
resident limit would revert to the hospital's previous level.
64 Fed. Reg. at 24736.
The AAMC is pleased to see this much-needed provision. Such
a policy is consistent with HCFA's and the Congress' intent
regarding resident limits. When a teaching hospital closes,
the entity where the residents train must change, but the
total number of residents in training remains constant. HCFA's
proposed policy helps to ensure that residents from hospitals
that close can complete their training without penalizing
hospitals that agree to train them.
To fully address HCFA's intentions on this topic, the final
regulation must also encompass less draconian situations.
Specifically, hospitals that train displaced residents due
to individual residency program closures must be entitled
to a temporary adjustment to their resident limits. It is
not uncommon for individual residency training programs to
cease operations in the middle of residents' training periods.
This may occur for a number of reasons, including abrupt accreditation
withdrawals. Additionally, hospitals may declare bankruptcy
or experience financial distress and, as a consequence, need
to close programs, even though the hospital itself is not
closing.
In operational and policy terms, the impact of closing residency
training programs on residents and other hospitals is no different
from a hospital closure situation. Residents must finish their
training at other hospitals, and these hospitals require adjustments
to their limits to receive appropriate Medicare reimbursements
associated with the residents. As with closures, the aggregate
number of residents is not increasing, and the adjustment
would be temporary. HCFA's concern about the reluctance of
hospitals to accept additional residents from closing hospitals
is equally applicable when a program closes. Consequently,
the final rule should broaden the current proposal to permit
temporary adjustments for hospitals that take on residents
from residency training programs that have closed. We would
be happy to work with HCFA on any administrative issues in
this area.
We also have several concerns regarding the specific criteria
proposed in order for hospitals to receive temporary adjustments.
First, the proposed rule states that a hospital must "submit
a request" to its fiscal intermediary. In the final rule,
HCFA should clarify that if the hospital meets the criteria
as stated in the proposed rule, the hospital is entitled to
an adjustment; that is, the FI does not have discretion to
deny requests if hospitals meet the stated requirements.
Second, we are concerned about the requirement that requests
be submitted 60 days prior to beginning to train the additional
residents. HCFA provides no explanation as to why 60 days
is needed. Often, when residency programs close, residents
must find alternative training sites as soon as possible.
The sixty-day requirement will drastically impede this process.
We believe that hospitals must be given the flexibility to
begin training the additional residents as soon as they deem
feasible. A more reasonable alternative to HCFA's proposal
would be to require that hospitals notify their FI that they
have taken on displaced residents within 60 days after beginning
to train the residents.
Finally, HCFA does not elaborate on how hospitals must identify
residents that come from closed programs. While this issue
may be addressed specifically in a subsequent program memorandum,
we believe the final rule must set forth some guidance as
to the type of identification procedures HCFA is contemplating.
If a mechanism does not already exist, we would be happy to
work with Agency staff to develop an identification process.
C. Residents Training in Nonhospital Sites
HCFA proposes a technical change related to hospitals receiving
reimbursement associated with residents training in nonhospital
sites. This change clarifies that hospitals "must incur"
all or substantially all of the costs of residency training
in nonhospital sites for the hospital to receive Medicare
payments associated with the time spent by residents in those
settings.
The AAMC strongly supports ambulatory residency training
in nonhospital sites. However, we reiterate our concern that
HCFA's change in the fiscal year (FY) 1999 final rule to require
hospitals to demonstrate that they are incurring supervisory
costs in order to receive Medicare teaching reimbursements
may result in fewer residents training in these settings.
In the final rule, we urge HCFA to address how the Agency
is monitoring the impact of this change.
II. Changes to the Hospital Wage Index
HCFA proposes to phase in a new methodology for calculating
the hospital wage index. It would exclude Part A physician
costs associated with supervisory teaching functions; costs
associated with other activities would remain in the calculation.
Under the transition, the FY 2000 wage index calculation would
be based on a blend comprising 80 percent of hospitals' average
hourly wages without removing the teaching-related costs,
and 20 percent with these costs removed. HCFA's stated rationale
for this change is that "[e]xcluding teaching physician
costs from the wage index calculation is consistent with our
general policy to exclude from that calculation those costs
that are paid separately from the prospective payment system."
64 Fed. Reg. at 24726.
The change proposed by HCFA will result in a lowering of
wage index values for a number of metropolitan statistical
areas (MSAs) that include major teaching hospitals. This corresponds
to lower Medicare inpatient payments for hospitals in these
areas. Consequently, as part of the hospital workgroup that
studied this issue, the AAMC supports a transition mechanism
and commends HCFA for adopting this recommendation.
It also is important that HCFA emphasize in the final rule
that its basis for the proposed change is that Medicare pays
its share of teaching supervisory costs through direct GME
payments.
The AAMC supports HCFA's proposal to rely on survey data
submitted by hospitals to determine the amount of the Part
A costs that should be excluded. We urge HCFA to incorporate
the necessary changes into the Medicare cost reports in a
timely manner so that this data may be submitted on a consistent
and regular basis.
III. Outliers
Under the prospective payment system, hospitals may receive
additional payments to offset losses from high cost cases
if the costs surpass the diagnosis-related group (DRG) payment
plus a threshold amount. HCFA proposes to increase this threshold
from $11,100 in FY 1999 to $14,575 in FY 2000. HCFA estimates
that as a result of the proposed higher threshold, total outlier
payments will equal 5.1 percent of total operating DRG payments.
64 Fed. Reg. at 24754.
The Medicare statute provides that outlier payments must
be between five and six percent of total DRG operating payments.
Social Security Act §1886(d)(5)(A)(iv). HCFA's proposes
to set the outlier pool at only 5.1 percent of total payments,
which requires a threshold that is 31 percent higher ($3,475)
than the FY 1999 threshold.
This jump in the threshold is too abrupt and, moreover, unnecessary.
HCFA has the authority to establish a threshold that corresponds
to an outlier pool of 5.5 percent. This is the midpoint of
the statutory range and would result in a more reasonable
threshold amount increase.
V. Hospitals-Within-Hospitals
In the proposed rule HCFA expressed concern that there may
be "financial incentives for inappropriate early discharges
from excluded hospitals-within-hospitals to prospective payment
system [PPS] hospitals." 64 Fed. Reg. at 24744. To remedy
this situation, HCFA is proposing that a hospital-within-a
hospital be denied exclusion if, during the most recent cost
reporting period, it transferred more than five percent of
its inpatients to the PPS hospital in which it is located.
HCFA has not provided any data to demonstrate that inappropriate
discharges from hospitals-within-hospitals are, in fact, a
problem. Further, HCFA has failed to show why five percent
is the appropriate level at which to set the threshold. The
AAMC urges HCFA to withdraw this proposal. If a problem exists
regarding inappropriate discharges, it should be addressed
through the coverage process, not through a change in the
regulation.
V. Conclusion
We appreciate the attention that HCFA is devoting to clarifying
and modifying the regulations relating to the GME resident
limits. We would be happy to work with HCFA on any of the
issues discussed above or other topics that involve the academic
health care community.
If you have questions concerning these comments, please feel
free to call Robert Dickler, Senior Vice President of the
Association, or Karen Fisher, Assistant Vice President, both
of whom may be reached at (202) 828-0490.
Sincerely,
Jordan J. Cohen, M.D.
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