Senate Panel Debates Medicare
Outliers
March 14, 2003 - The Senate Labor, Health and Human
Services, Education and Related Agencies Appropriations Subcommittee
March 11 held a hearing to discuss Medicare
outlier payments and the recent proposed regulation that
would change the outlier methodology. The proposed rule was
published by the Centers for Medicare and Medicaid Services
(CMS) on March 5; comments are due by April 4 [see Washington
Highlights, March 7].
CMS Administrator Tom Scully explained the rationale for
the rule, noting that Medicare outlier payments have skyrocketed
over the last several years, in large part because of what
CMS believes to be a "gaming" of the system by certain
hospitals. Describing the abuses that took place under the
existing policy, Mr. Scully stated, "some hospitals'
recent rates of charges increases greatly exceed their rates
of cost increases" which results in an "overestimation
of their current costs per case." The proposed rule,
said Scully, "prevents a further gaming of the system"
by "clos[ing] the loophole immediately" to "help
the hospitals that need it most."
Representatives from the hospital community discussed the
impact of the rule on their hospitals and argued for changes
to the proposed rule before it is finalized. Arguing that
the outlier changes would impose severe financial hardship
on hospitals that rely on these payments, they urged that
the outlier threshold be lowered and asked for a transition
period.
Joseph W. Marshall, Chairman and CEO of Temple University
Health System, testified that "lowering the outlier threshold
would allow more hospitals to receive payments to help offset
the costs of treating high-cost patients and would help mitigate
the effects on many hospitals that will otherwise see outlier
payments drop dramatically." Marshall also urged the
inclusion of a transition period to the new system "to
preserve the continuity of services at those hospitals that
would be most affected by the new rules." University
of Pittsburgh Medical Center Senior Vice President and Chief
Nursing Officer Gail Wolf agreed, saying an effective transition
could take "several years." Delaware Valley Healthcare
Council President Andrew Wigglesworth suggested that perhaps
the rule could be delayed until at least the next fiscal year.
In response to a question to CMS Administrator Scully by
Subcommittee Chair Arlen Spector (R-Pa.) as to why the outlier
cost threshold was not reduced in the rule, Mr. Scully noted
that, while CMS had supported a reduced threshold, because
outlier payments have been uncontrolled, the Office of Management
and Budget (OMB) did not want the threshold lowered until
more certainty existed that outlier payments would be contained
when the proposed changes are implemented. After the hearing,
the Administrator noted that recent data indicate that even
with the current threshold level, it appears that outlier
payments will exceed expected levels for the current year.
Senator Spector also questioned the Administrator as to why
a transition period was not included in the proposed rule
when, in the past, changes to other major policies, such as
IME reductions and the introduction of the capital prospective
payment system included phase-in periods. Mr. Scully responded
that the Senator's examples did not involve "program
abuse."
Information:
Lynne Davis Boyle, Assistant Vice President
AAMC Office of Governmental Relations
ldavisboyle@aamc.org
(202) 828-0526
Karen Fisher, Senior Associate Vice President
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
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