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Fiscal Year 2001 Medicare Prospective Payment System: Proposed Rule

			Related Resources CMS (fomerly HCFA) AAMC Documents AAMC Summary and Analysis of Proposed Rule Comment Letter on Proposed Rule

Current Status as of July 31, 2000

On May 5, 2000 the Health Care Financing Administration (HCFA) published its proposed rule setting forth the changes to the Prospective Payment System (PPS) for hospital inpatient services for fiscal year (FY) 2001.

Summary

According to the proposed rule, the standardized payment amount for hospitals' per case payments under the inpatient PPS will increase by 2 percent in FY 2001. This reflects the requirement in the Balanced Budget Act of 1997 (BBA) that the update factor equals the increase in the hospital market basket less 1.1 percentage points. However, the other changes in the rule, including a reduction in the indirect medical education (IME) adjustment from 6.5 percent to 6.25 percent, will actually only increase payments by 1.2 percent compared to FY 2000. Teaching hospitals with 100 or more residents will see per case increases of only 0.8 percent, compared to 1.1 percent and 1.4 percent for other teaching and non-teaching hospitals, respectively.

The proposed rule also implements changes to the direct graduate medical education (DGME) payment methodology as mandated by the Balanced Budget Refinement Act (BBRA). The new methodology centers around a national average per resident amount that is adjusted by a geographic adjustment factor that varies according to the physician fee schedule area in which a hospital is located ("locality adjustment"). Hospitals DGME payments will be altered if their individual per resident amounts are either below 70% of the locality adjusted national average ("floor") or above 140% of the national average ("ceiling").

According to a financial impact analysis included in the proposed rule, HCFA estimates that the new methodology will cost the Medicare program about $14.6 million in FY 2001. About 340 hospitals will see their per resident amounts increased to the 70 percent floor, while 180 hospitals with amounts that exceed the 140 percent ceiling will have their payments frozen.

Other areas addressed in the May 5 proposed rule include:

• continuing the five-year phase-out of costs associated with teaching physicians in the calculation of the hospital wage index;
• setting the outlier threshold for FY 2001 at $17,250, up from $14,050 in FY 2000; and
• not expanding HCFA's transfer policy beyond the current ten diagnosis- related-groups (DRGs).

AAMC Action

The AAMC has prepared a summary and analysis (PDF, 9 pages - 555KB) of the proposed rule and submitted comments on it.

Contacts

Proposed Rule

The proposed rule, published May 5, 2000 in the Federal Register is available in four parts in text format and Portable Document Format (PDF):

42 CFR Parts 412, 413, and 485
Medicare Program; Changes to the Hospital
Inpatient Prospective Payment Systems and Fiscal
Year 2001 Rates; Proposed Rule

• Part I [pp.26281-26330]: Text / PDF
• Part II [pp.26331-26380]: Text / PDF
• Part III [pp.26381-26430]: Text / PDF
• Part IV [pp.26431-26436]: Text / PDF

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