Associations criticize new Medicare payment plan

A new Medicare payment system for inpatient procedures would be based on hospital costs rather than hospital charges and would expand the diagnostic-related groups to ensure greater accuracy, according to the Centers for Medicare and Medicaid Services.

Several medical societies dispute the merits of CMS’s plan, however, and insist that access to high-tech procedures could be put in jeopardy under the new rule.

CMS announced the proposed change on April 12, 2006. A comment period expired on June 12, 2006, and the rules are scheduled to go into effect on October 1, 2006.

The proposed changes reflect recommendations from the Medicare Payment Advisory Commission and respond to some Congressional concerns that the existing system may create incentives for certain hospitals to “cherry pick” the most profitable cases.

“The hospital payment reforms we are proposing today will mean payments for hospital inpatient services will more accurately reflect the costs of providing these services,” CMS Administrator Mark B. McClellan, MD, PhD, said in a written statement released when the rules were first proposed.

Professional societies disagree. “The hospital inpatient rule is too much, too soon and too flawed,” Stephen J. Ubl, president and CEO of AdvaMed, said during a press conference.

AdvaMed is a professional society of medical device companies. Ubl said the new Medicare rules would short-change hospitals and potentially limit access to new technologies. “This rule is going to preclude patients from getting needed therapy and it will have a chilling effect on access,” Ubl said.

From charges to costs

The first step in CMS’s plan would assign weights to diagnostic-related groups (DRG) based on hospital costs rather than hospital charges. According to documents provided by CMS, this would eliminate bias in the current DRG system arising from the differential markup hospitals assign for ancillary services among the DRGs.

Ubl said the problem with this plan is that Medicare is basing its cost estimates on data that are three to five years old, an era before widespread use of technologies like drug-eluting stents and implantable cardioverter defibrillators.

Payment for drug-eluting stents could be reduced by as much as 33%, Ubl said.

Mark A. Turco, MD, director of the Center for Cardiac and Vascular Research at Washington Adventist Hospital in Washington, D.C., spoke on behalf of the Society for Cardiovascular Angiography and Interventions (SCAI).

“Under current Medicare payment structure, Medicare only reimburses for the first drug-eluting stent we use, and we typically use between 1.4 and 1.7 stents per patient,” Turco said. “We need a steady stream of innovation to help us deliver the highest quality of care. It is shortsighted of Medicare to base payment on cost data from an era where many of the new technologies we have today simply did not exist.”

In an interview with Cardiology Today, Samuel Wann, MD, medical director for the diagnostic laboratories at Wisconsin Heart and Vascular Clinics and section editor of Cardiology Today's Health Policy, Patient and Practice Issues section, shared Turco’s concern.

“Like most cardiac programs, we must deal with a community-wide decline in cardiac surgical volume and an increase in the use of high technology for which we are not adequately compensated. The switch from a charge-based to a cost-based system of payment makes sense only if these new technologies are adequately covered,” Wann said.

Losing money on CRT

Ubl cited cardiac resynchronization devices as an example of potential hospital losses. AdvaMed estimates that the cost of implanting a device is $31,833, but under the new Medicare rule the payment would be $23,755, for a net loss to the hospital of $8,078 (25.4%).

Dwight Reynolds, MD, president of the Heart Rhythm Society and chief of cardiology at Oklahoma University Health Sciences Center, said cardiac resynchronization therapy reduces hospitalizations by 87%, days hospitalized for heart failure by 93% and relative risk of mortality by 51%.

“Countless studies have not only proven the medical value of these therapies for patients, but in addition, these technologies have also been shown to be cost-effective,” Reynolds said. “CMS’s proposed changes to the hospital inpatient payment system will significantly hinder our mission to improve care and advance treatments for heart rhythm disorders.”

The second step in Medicare’s plan would replace the current 526 DRGs with either 861 proposed DRGs, consolidated for severity adjustments, or an alternative system based on comments received. – by Jeremy Moore