Ref: CMS-1203-P - Medicare Program; Changes to the Inpatient Prospective Payment System and Fiscal Year 2003 Rates; Proposed Rule (67 Federal Register 31404), May 9, 2002.

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Wednesday, June 26th 2002

Thomas A. Scully
Centers for Medicare & Medicaid Services
200 Independence Avenue, S.W. Room 443-G
Washington, DC 20201

Dear Mr. Scully:

On behalf of our nearly 5,000 member hospitals, health care systems, networks and other providers of care, the American Hospital Association (AHA) appreciates the opportunity to comment on the Centers for Medicare & Medicaid Services (CMS) proposed rule establishing new policies and payment rates for hospital inpatient services for fiscal year 2003, as well as new policies related to provider-based designations and the Emergency Medical Treatment and Labor Act (EMTALA). The adequacy of payments under the Medicare prospective payment system (PPS) continues to be essential to ensuring access to high quality health care for Medicare beneficiaries.

The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) sets the FY 2003 inpatient PPS update for hospitals at the rate of increase in the market basket index (estimated at 3.3 percent) less 0.55 percentage points, or 2.75 percent. Legislative and regulatory changes, however, and technical adjustments to ensure budget neutrality, result in a proposed average per case payment increase of only 0.4 percent for Fiscal Year (FY) 2003. Moreover, hospitals in large urban areas are expected to experience an actual decline in per case payments in FY 2003.

Additionally, the rule contains a proposal to expand the post-acute care transfer policy that, if implemented, will further reduce payments to hospitals. While the impact of this provision was not included in CMS' per case analysis, it is expected to cut payments to hospitals by at least $900 million, and potentially up to $1.9 billion, in FY 2003 alone. This proposal must be withdrawn.

These cuts are coming at a time when hospitals need additional funds to address critical issues - such as severe worker shortages, expensive new drugs and technologies, disaster preparedness, aging facilities, expensive regulatory mandates, and skyrocketing health care liability premiums. A "budget neutral adjusted" update of 0.4 percent - approximately 98 percent less than the current rate of inflation faced by hospitals - jeopardizes hospitals' ability to carry out their missions. We will continue to urge Congress to provide adequate Medicare reimbursement to hospitals. And in our comments on this proposed rule, we encourage you to make changes that would mitigate this impact.

Attached are AHA's detailed comments regarding CMS's proposed changes to the inpatient payment system, including those related to the transfer policy, outlier threshold, wage index provisions, graduate medical education, new technology, and provisions specifically affecting small rural hospitals. Also attached are comments regarding the outpatient payment issues that were addressed in this inpatient rule, specifically those related to provider-based requirements and EMTALA. Finally, we have included comments on CMS' proposed changes to diagnosis related groupings (DRGs).

The AHA appreciates the opportunity to submit these comments on the proposed rule. If you have any questions about these comments, please feel free to contact me or Ashley Thompson, senior associate director for policy, at (202) 626-2340. Specific questions regarding our EMTALA comments may also be directed to Maureen Mudron at 202-626-2301, and questions regarding the coding or DRG reclassification comments may also be directed to Nelly Leon-Chisen at (312) 422-3396.



Rick Pollack
Executive Vice President


Comments on Proposed Changes to Inpatient Payments and EMTALA

Analysis of Inflation Factor Used in Setting Outlier Thresholds FY 2003


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