Fiscal Year 2007 Medicare Inpatient
Prospective Payment System Proposed Rule
Current Status
On June 12, the AAMC submitted comments
on the FY 2007 Medicare inpatient prospective payment system proposed
rule.
Brief Overview
Major teaching hospitals would see their Medicare per case payments
increase by significantly less than what Congress authorized if
changes in the rule are finalized. According to the CMS press release,
this proposed rule begins a transition to the "first significant
revision of the Inpatient Prospective Payment System (IPPS) since
its implementation in 1983."
CMS has indicated it will consider comments it receives in response
to its proposal. In a press release, CMS Administrator Mark McClellan
states that "This proposed rule will be shaped by the public comment
process. . .We look forward to comprehensive feedback from hospitals,
suppliers, and other stakeholders that will help to refine and improve
the final version of the rule."
The proposed rule was published by the Centers for Medicare and
Medicaid Services (CMS) in the Federal Register [71 Fed. Reg. 23996]
on April 25.
Impact
While current law specifies that the Medicare base per case
payment increase by 3.4 percent in FY 2007, CMS estimates that teaching
hospitals training 100 or more residents would see average per case
payments in FY 2007 that would be only 2.1 percent higher than last
year. Other teaching hospitals and non-teaching hospitals would
see increases of 2.6 percent and 4.8 percent respectively; rural
hospitals would see an average increase of 6.7 percent.
DRG Changes
A portion of the lower increase is due to the legislatively
mandated cut in indirect medical education (IME) payments, from
5.55 percent to 5.35 percent. However, the reduction also is due
in large part to a proposed significant regulatory change to the
diagnosis-related group (DRG) payment weight calculation from a
charge-based method to a hospital-specific cost based method. According
to the proposed rule, this change reduces payments from those cases
that require more ancillary services, such as surgical cases, while
medical cases would see payment increases.
The movement from a charge-based to cost-based weighting methodology
is the first of CMS's envisioned two-part transformation to the
IPPS. In FY 2008, CMS proposes to move to a new DRG system that
would better reflect severity. In theory, such a change should help
major teaching hospitals because they tend to treat the most severe
Medicare patients.
DGME and IME Changes
The rule also contained several changes to Medicare direct graduate
medical education (DGME) and IME payments.
A purported clarification by the Centers for Medicare & Medicaid
Services (CMS) that would prohibit teaching hospitals from including,
for purposes of Medicare direct graduate medical education (DGME)
and indirect medical education (IME) payments, time that residents
spend in didactic activities could have an impact on both teaching
hospital Medicare payments as well GME educational activities.
The proposed rule states that resident training that occurs in
non-hospital sites must be related to patient care if a hospital
wishes to count that time for DGME and IME payment purposes. Resident
time spent in didactic activities that often may occur in associated
medical schools, such as educational conferences, journal clubs,
and seminars would be specifically excluded. CMS noted that its
statement in a previous letter on this topic "implying that didactic
time spent in non-hospital settings could be counted for direct
GME and IME . . .was inaccurate." CMS noted that time spent in these
activities could be counted for DGME purposes if they occur in a
hospital; however, the counting prohibition applies for IME payments
regardless of where the educational activity occurs.
The proposed rule also contains several more minor technical changes
relating to documentation requirements, GME aggregation agreements,
and determination of per resident amounts when teaching hospitals
merge.
Contacts
Karen Fisher, Sr. Director, Health Care Affairs
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
Diana Mayes, Specialist
AAMC Health Care Affairs
dmayes@aamc.org
(202) 828-0498
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