In the never ending struggle to come up with an equitable – and cheap – payment methodolgy for Medicare, the Bush Administration has turned its attention to hospital payments. Since there is about $125 billion at stake here, this does make sense.
In April, CMS published a proposed revision to the payment scheme that would be tied to hospital costs rather than charges. Since charges have no bearing on reality, the only people who pay charges are those least able to pay charges. Unfortuntately, cost data is at least two years old, and cannot keep pace with new technology. There is a provision for special add-on payments for certain approved new technology.
The proposed regs also want to adjust DRG payments to account for the severity of illness. One of the goals of the revisions is to take away incentives to cherry pick high profit cases, which has led to the development of heart specialty hospitals in particular. All parties are concerned, of course, because these are big changes, and strategies, businesses and careers have been built and rest on the current system. The system, developed by Yale researchers, was intended as a research tool, not the basis of a payment scheme. In the midst of the Reagan presidency, is became a payment scheme.
A recent New York Times article points out another “problem”. It seems that the proposed system is based on a proprietary system developed by 3M. 3M also received a sole source contract to evaluate the ability of their system to be adapted to Medicare, AND they are marketing their proprietary system as to hospitals to ease the transition to the new system. 3M denies there is a conflict. How egregious does one have to be?
The final regs are scheduled to be published in the latter part of the year. For more reading pleasure, read the CMS press release, and for even more fun, see the proposed regs.