Transfer Proposal Rescinded
But Increased Outlier Threshold Remains Under Medicare Final
Inpatient Rule
August 2, 2002 - The Centers for Medicare and Medicaid
Services (CMS) Aug. 1 published its federal fiscal year 2003
Medicare
inpatient prospective payment system final rule [67 Fed.
Reg. 49982]. In a decision that has important financial implications
for teaching hospitals, CMS rescinded a policy suggested in
the proposed rule to expand its post-acute care transfer policy
from the current 10 diagnosis-related groups (DRGs) to all
DRGs. Under the policy, hospitals discharging patients associated
with one of the 10 DRGS to a post-acute facility prior to
the corresponding average length of stay would receive less
than the full DRG payment. If CMS' proposal to expand this
policy had been implemented, it would have meant almost $2
billion less in Medicare payments to hospitals.
Despite strong comments from the hospital community, CMS
did not back off its decision to increase the outlier threshold
by 60 percent. The outlier policy is intended to provide additional
payments for cases that result in significantly higher costs.
To receive the payments, the case's costs must exceed a "threshold."
Medicare then pays 80 percent of the costs in excess of the
threshold. Under the final rule, the federal FY 2003 outlier
threshold will be $33,560, up from $21,025 in federal FY 2002.
The agency's primary rationale for such a large increase is
that outlier payments are exceeding the amount set aside for
this purpose and increasing the threshold will reduce outlier
payments to the appropriate level.
In the medical education arena, the final rule implemented
without any major changes the proposal to prohibit hospitals
that are part of resident limit affiliation agreements from
permanently transferring portions of their resident limits
at the end of the agreement. Affiliation agreements permit
hospitals to aggregate their resident limits and redistribute
them among the agreement participants so long as the aggregate
limit is not exceeded. Prior to the final rule, participant
hospitals were permitted to agree to make these redistributions
permanent.
The final rule also implements an update to the standardized
payment amount of 2.95 percent. This reflects a market basket
increase of 3.5 percent, less 0.55 percentage points (as specified
in current law). In legislation passed recently by the House
of Representatives (HR 4954), the federal FY 2003 update would
equal the full market basket increase; the Senate has yet
to act on similar legislative proposals.
CMS proposed a number of changes to the provider-based criteria
that must be met for an entity to bill under the Medicare
outpatient prospective payment system. The final rule adopts
most of the changes as proposed, with the result that provider-based
entities located on the campus of the main provider only need
to met the criteria related to licensure, integration of clinical
services, financial integration and public awareness. Off-campus
facilities must meet additional criteria.
Of the many changes to the Emergency Treatment and Active
Labor Act (EMTALA or the "anti-dumping law") that
were proposed, the only one adopted in this rule is the clarification
that EMTALA applies only to those departments on the hospital's
main campus that are provider-based; it does not apply to
provider-based entities that are either on or off the hospital
campus. CMS will publish shortly a separate document that
will finalize other changes to the EMTALA policy that had
been included in the proposed rule.
Finally, CMS decided not increase the labor-related share
of DRG payments that is adjusted by the hospital wage index,
as had been proposed.
Information:
Karen Fisher, Sr. Director, Health Care Affairs
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
Ivy Baer, Director & Regulatory Counsel
AAMC Health Care Affairs
ibaer@aamc.orc
(202) 828-0490
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