CMS-1470-P — Medicare Program; Changes to the Hospital Inpatient Prospective Payment System and Fiscal Year 2004 Rates; Proposed Rule (68 Federal Register 27154), May 19, 2003.

Liberty Place, Suite 700
325 Seventh Street, NW
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(202) 638-1100 Phone

Wednesday, July 2nd 2003

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 (FY) 2004.  Adequate payments under the Medicare prospective payment system (PPS) continues to be essential to ensuring access to high quality health care for Medicare beneficiaries.

Current law sets the FY 2004 inpatient PPS update for hospitals at the rate of increase in the market basket, now estimated at 3.5 percent.  Legislative and proposed regulatory changes, however, along with technical adjustments to ensure budget neutrality would result in a proposed average per case payment increase of only 2.5 percent.  Hospitals cannot continue to receive actual updates that are less than the rate of hospital inflation.  

AHA data from 2001 (the most recent available) indicate that aggregate Medicare payments to hospitals are less than the actual costs hospitals incur in providing services, with Medicare paying only 98.4 cents for every dollar of care provided to Medicare beneficiaries.  Hospitals cannot continue to absorb payment shortfalls.   In 2001, 57 percent of hospitals had negative Medicare margins and one out of every three hospitals was losing money overall.  We will continue to urge Congress to provide adequate Medicare reimbursement to hospitals.  And in our comments on this proposed rule, we also encourage CMS to make changes that would prevent further decline in Medicare payments.

We are tremendously disappointed that the rule contains a proposal to further expand the post-acute care transfer policy, which would reduce hospital payments by $160 million in FY 2004 alone.  This policy is not in the best interest of patients or caregivers.  It undermines clinical decision-making and penalizes hospitals for providing the right care at the right time and in the right setting.  This policy must be withdrawn.  

Additionally, we oppose the excessive increase in the outlier threshold.  The new threshold of $50,645 will make it almost impossible for hospitals to qualify for outlier payments, and will require hospitals to lose an extraordinary amount of money before additional outlier payments even become available.  The outlier threshold must be lowered.

The proposed 268-page rule is incredibly complex with numerous changes in hospital payment policy.  We are disappointed that CMS delayed release of the rule, and that this delay resulted in a shortened comment period for hospitals.  By law, interested parties are to be given 60-days from notice of the proposed regulation in the Federal Register to submit their comments (42 U.S.C. 1395hh(b)).  This shortened timeframe makes it extremely difficult to read and analyze the proposed rule, share the information with our members, and solicit their feedback, comments, and concerns.  We urge CMS to ensure a full 60-day comment period in the future.  

We also urge CMS to consider accepting late comment letters, given that the proposed rule had an incorrect deadline date of July 18, 2003.  Moreover, the correction notice issued on June 4 also had an incorrect date of July 15, 2003, such that it was not until June 9 that a Federal Register notice appeared with the correct date of July 8, 2003 – less than a month before the actual comment due date.   

The late release of the 2002 Medpar file on June 19 will require the AHA to later submit a “technical addendum” that will contain a more detailed data analysis of the impact of the rule’s provisions on hospitals.  Please watch for these additional AHA comments to be submitted closer to the July 8 deadline date.

Attached are the 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, new technology, graduate medical education, critical access hospitals, and diagnosis-related groupings.   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.  


Rick Pollack
Executive Vice President



Transfer Provision.  The American Hospital Association (AHA) strongly opposes any expansion of the post-acute care transfer policy to additional diagnosis-related groups (DRGs).  

Since fiscal year (FY) 1999, Medicare patients in 10 DRGs discharged to a post-acute care setting – including rehabilitation hospitals and units, long-term care hospitals and units, cancer hospitals, psychiatric hospitals, children’s hospitals, and skilled nursing facilities (SNFs)– or discharged within three days to home health services, are defined as transfer cases when their acute care length of stay is at least one day less than the national average.  These cases are paid a daily (per diem) rate, rather than a fixed DRG amount, up to the full PPS rate.  Thus, if a patient has a shorter than average inpatient stay, even by just one day, the hospital is paid less than the full DRG rate.  

The Centers for Medicare & Medicaid Services (CMS) is proposing to expand the post-acute care transfer policy to an additional 19 DRGs, which is estimated to result in reduced payments to hospitals of $160 million in FY 2004 alone.  The agency indicated that it conducted an extensive analysis to identify the best method by which to expand the transfer policy, and is proposing to select DRGs that meet the following criteria:

  • The DRG must have at least 14,000 cases of post-acute care transfers.
  • The DRG must have at least 10 percent of its post-acute care transfers occurring before the mean length of stay for the DRG.
  • The DRG must have a length of stay of at least three days.
  • The DRG must have at least a 7 percent decrease in length of stay over the past five years (1998-2003).

Twelve additional DRGs meet these criteria (DRGs 12, 24, 89, 121, 130, 239, 243, 277, 296, 320, 462, 468), and CMS is proposing to include an additional seven corresponding or  “paired DRGs” (DRGs 25, 90, 122, 131, 278, 297, 321), which have the same diagnosis but include a complicating or comordid condition.  It is interesting to note that half of the current 10 DRGs subject to the post-acute transfer provision would fail to meet CMS’s new criteria.   The AHA is conducting an analysis of the DRGs chosen by CMS and may submit additional comments in a “technical addendum” once our review is completed.  

The expansion of the transfer policy undercuts the basic principles and objectives of the Medicare prospective payment system.   Last year CMS proposed expanding the post-acute care transfer policy to at least an additional 13 DRGs but determined not to do so because, among other reasons, it was unable to completely respond to all of the points raised by commenters prior to publication of the final rule.  In its FY 2003 Inpatient PPS Final Rule, the agency stated that, “Specifically, we intend to undertake a more comprehensive analysis of the impact of the averaging aspects of the prospective payment system if this policy were to be expanded” (67 Federal Register 50049, August 1, 2002).  Yet in its proposed rule, CMS does not provide a comprehensive analysis, much less a discussion, of the impact of the transfer policy on the averaging aspects of the PPS.  

The Medicare inpatient PPS is based on a system of averages.  Cases with higher than average lengths of stay tend to be paid less than costs while cases with shorter than average stays tend to be paid more than costs.  The expansion of this policy makes it impossible for hospitals to break even on patients that receive post-acute care after discharge.  Hospitals “lose” if a patient is discharged prior to the mean length of stay, and they “lose” if patients are discharged after the mean length of stay.  

In the July 31, 1998 publication of the FY 1999 final rule implementing the policy for the current 10 DRGs, CMS included an analysis showing that across almost all lengths of stay for each of the 10 DRGs, hospitals would, on average, be paid in excess of their costs even after the implementation of the provision.  We have not seen any such data for the new proposed 19 DRGs, and we believe expansion of the provision is just a back door budget cut to hospitals – especially given that Health Economics Research, Inc. in its report of July 31, 2000 showed that short-stay post-acute transfer cases are 7.4 percent more costly than short-stay non-post acute care transfer cases (Table 4-8).   

The post-acute transfer policy penalizes hospitals for efficient treatment, and for ensuring that patients receive the right care at the right time in the right place.   The policy disadvantages hospitals that make sound clinical judgments about the best setting of care for patients – and this setting is often outside of the hospital’s four walls.  Hospitals should not be penalized for greater than average efficiency.  Particularly, facilities in regions of the country where managed care has yielded lower lengths of hospital stay for all patients are disproportionately penalized.  And rural facilities are disproportionately affected, as they tend to have more “short-stay” (those discharged sooner than one day less than the average length of stay) patients discharged to post-acute care settings.  The policy does not create equity; rather it harms all hospitals and the patients we serve.  

The post-acute transfer policy is not necessary, as the perceived “gaming” hypothesis does not exist.   When Congress first called for expansion of the transfer policy in the Balanced Budget Act of 1997 (BBA), data showed that Medicare inpatient lengths of stay were dropping, and that both use and cost of post-acute care by Medicare beneficiaries was growing.  Since that time, however, inpatient length of stay has stabilized.  Medicare spending on post-acute care has slowed as post-acute payment systems have moved from cost-based reimbursement to prospective payment.  CMS states in its proposed rule that, “The movement to transfer more and more patients for post-acute care sooner appears to have abated in recent years” (p.27411).  Additionally, studies by the AHA and others show that the majority of patients who use post-acute care have longer – not shorter – hospital stays than patients that don’t use post-acute care, demonstrating that these patients are truly “sicker” and in need of additional care.  If the agency is concerned about premature discharges, then we recommend it focus on improving the quality review process rather than further expand the transfer provision.

The statute clearly states that the Secretary is authorized, but not required, to expand this policy to additional DRGs after FY 2000.  The policy was not expanded in FY 2001, FY 2002 or FY 2003 for sound policy reasons, and we encourage the same for FY 2004 and all subsequent years.  The AHA strongly urges CMS to remove this provision in its final rule, and, if CMS proceeds with this unjustified and unreasonable provision, then the AHA strongly urges returning any savings to the base DRG payment rates.  

Outlier Threshold.  The AHA strongly opposes the excessive increase in the outlier threshold.  

Outlier payments are a critical and necessary component of any prospective payment system based on averages.  By statute, Medicare provides extra payments for unusually high cost cases in order to limit hospitals’ financial risk while ensuring that elderly patients with especially serious illnesses receive appropriate care.  These outlier payments are made only if the DRG payment, plus Indirect Medical Education (IME) and Disproportionate Share Hospital (DSH) payments, plus any payments for new technologies, plus some threshold (set annually by CMS) is exceeded.  In the rule, CMS proposes setting the FY 2004 threshold at $50,645, an increase of over 50 percent from the FY 2003 threshold amount of $33,560.  This steep rise makes it extremely difficult for hospitals to qualify for outlier payments and puts them at greater risk when treating high-cost cases.

On March 5, 2003 (68 Federal Register 10420), CMS issued a proposed rule with significant changes to its outlier policy.  On June 9, 2003 (68 Federal Register 34494) –after release of the inpatient PPS proposed rule – the agency published a final rule that:

  • Requires fiscal intermediaries (FI) to use more up-to-date data when determining a hospital’s cost-to-charge ratio (CCR).  Specifically, effective October 1, 2003, FIs are to use either the most recent settled or the most recent tentatively settled cost report.  
  • Eliminates the requirement that an FI assign a hospital the statewide average CCR when the hospital’s CCR falls below established thresholds.  Rather, effective August 8, 2003, CMS will use the hospital’s actual CCR.
  • Allows FIs to reconcile outlier payments for certain hospitals when a hospital’s cost report is settled.  

Yet in making these very significant changes, CMS stated that the outlier threshold would remain at $33,560 for the remainder of FY 2003, and, even with these changes, declined to propose a new threshold for FY 2004.  

Given that CMS will use more recent CCRs, eliminate the statewide average floor, and require reconciliation of outlier payments, overall Medicare spending on outliers will be dramatically reduced.    The threshold amount must be lowered to reflect these modifications in outlier payment policy.  CMS indicated in its inpatient PPS proposed rule that, “the final FY 2004 threshold is likely to be different from this proposed threshold [$50,645], as a result of any changes subsequent to the March 5, 2003 [outlier] proposed rule” (p. 27235).  The AHA currently is reviewing the newly released FY 2002 Medpar file to calculate an appropriate outlier threshold for FY 2004, and will share this analysis with CMS in its technical addendum.  Lowering the threshold considerably is absolutely necessary to ensure hospitals receive the full 5.1 percent of payments that will be withheld from base inpatient payment in 2004, and to ensure that all hospitals have access to these special payments to cover extremely high-cost patients.  The AHA strongly urges CMS to significantly lower the outlier threshold.  

Wage Index

  • Timeline.  The AHA opposes CMS’s proposal to modify the process and timetable for updating the wage index for FY 2005.  

    The agency is proposing to release preliminary wage data prior to requiring that FIs conduct their initial desk review of the data.  The unaudited data would be available to hospitals on the Internet by early October rather than early January.  Hospitals would then need to review this file and submit correct data and any requests for changes by early November.  The AHA is concerned by the new timing and the shortened 30-day review period.  Because the data would not yet be audited by the FI, it is unclear whether this review would be beneficial.  And, more importantly, 30 days is not enough time for hospitals to conduct a thorough and complete review of the detailed data.  

    Given that hospitals will need to collect and submit occupational mix data by September 30 for CMS’s use in adjusting the FY 2005 wage index, and given that CMS may adopt the Office of Management and Budget’s (OMB) new definitions of Metropolitan Statistical Areas for the FY 2005 wage index (see below), the AHA urges CMS to postpone any changes to the wage index timeline until FY 2006.  In addition, we urge CMS to consult with the hospital field to determine the most appropriate timetable that would decrease the burden on FIs to perform a duplicative review process, while ensuring that hospitals have the time necessary to submit accurate and reliable data.

  • CAH Data.  In the proposed rule, the agency has requested public comments on whether wage data from critical access hospitals (CAHs) should be excluded from the wage index.  Currently, the proposed FY 2004 wage index includes wage data for all facilities that were inpatient PPS hospitals in FY 2000 – even if these facilities were subsequently converted to CAH status.  While CMS believes that including wage data for CAHs is appropriate to reflect the market area during the relevant past period, others have suggested that the data be removed, as these facilities are no longer operating under PPS.  While AHA would support the removal of CAHs from the wage index, we are concerned about the immediate financial impact this might have on all hospitals in FY 2004.  Thus, we recommend that CMS examine the impact that removing CAH wage data would have and make this analysis available for notice and public comment.  
  • Paid Hours.  CMS has proposed excluding paid military leave and jury duty leave from the wage index calculation beginning in 2005.  Unlike other paid leave categories in which workers are paid at their full hourly rates (i.e., sick, vacation), hospitals typically pay military and jury duty only a fraction of their normal pay, resulting in a lower hospital average hourly wage and thus wage index.  Additionally, CMS is soliciting public comments on whether paid lunch or meal break hours should be excluded from the calculation of the wage index, as inclusion of these hours may disadvantage hospitals that are required by union contacts to provide paid lunch hours.  The AHA is unsure whether these changes will result in any greater accuracy of the wage index.  We are concerned that the additional data collection effort for providers will outweigh any benefits achieved through these changes.  
  • Occupational Mix.  In the proposed rule, CMS announced its intent to collect occupational mix data from all inpatient PPS hospitals and incorporate this data into the FY 2005 wage index.  On April 4, 2003, the agency published a notice of intent to collect 2002 data from hospitals, and provided an opportunity to comment on a proposed survey tool.  As AHA stated in its comment letter of June 2, 2003, we are tremendously disappointed that CMS proposed a data collection tool without including any information as to how the survey data will be used to adjust the overall wage index.  We strongly recommend that CMS immediately publish a detailed proposed methodology, for comment, illustrating how the occupational mix index will be calculated and how it will be used to adjust the overall wage index.  Until this data and information are available, hospitals should not be required to divert additional resources from patient care to complete a burdensome, and potentially unusable, occupational mix survey.    
  • New Core Based Statistical Areas.  For purposes of the wage index, CMS currently defines hospital labor markets based on OMB’s definitions of Metropolitan Statistical Areas (MSA), as well as Primary MSAs (PMSA) and New England County Metropolitan Areas (NECMAs).  Rural areas are defined as those outside a designated MSA, PMSA or NECMA.  In June, OMB released its revised standards for defining MSAs, including its new definitions of “Core Based Statistical Areas” (CBSAs) based on 2000 census data.  The new standards establish two categories of CBSAs: (1) Metropolitan Statistical Areas (with populations of 50,000 or more) and 2) Micropolitan Statistical Areas (with populations from 10,000 – 49,999).  These new definitions could result in significant changes to a hospital’s wage index calculation.  We are pleased that CMS indicated in its proposed rule that it would take the time necessary to evaluate the new area designations and their possible effects on the Medicare hospital wage index, and that the earliest these new CBSA definitions would be used is for the FY 2005 wage index.  The AHA believes it is critical to allow CMS and others an opportunity to review the new definitions and their impact before implementing any changes to wage index.  

New Technology

In the FY 2003 inpatient PPS final rule, CMS approved new technology add-on payments beginning October 1, 2002 for the severe sepsis drug Xigrisâ.  Due to system problems, CMS announced that it would not be able to provide the additional add-on payment until April 1, 2003.  On April 4, 2003, CMS released a subsequent Program Memorandum announcing an additional delay in payment, stating that Xigrisâ claims would be mass adjusted beginning June 2.  At this time it is still unclear whether hospitals have received any new technology payments.  We urge CMS to expeditiously make the adjustments necessary to its PRICER software to allow for payment of approved new technologies.   Given that $74.8 million was carved out of the base inpatient PPS rate in FY 2003 to fund this new technology, and that CMS is proposing to carve out another $50 million in FY 2004, we believe it is critical that a reliable system be put in place to ensure that hospitals receive these add-on payments.

In the FY 2004 rule, CMS is proposing to change the current cost threshold for a new technology to qualify for add-on payment.  Specifically, CMS is proposing to reduce the cost threshold from one standard deviation to 75 percent of one standard deviation beyond the geometric mean standardized charge for all cases in the DRG.  The result may be that more technologies, which include new medical and surgical procedures as well as new pharmaceuticals, biologics and devices, will be able to qualify for special add-on payment.  

In our comment letter on the FY 2002 inpatient PPS proposed rule, we supported CMS’s proposed criteria for what would qualify as a new technology, including setting a cost threshold for new technologies at one standard deviation above the mean adjusted charge for the DRG.  Given that current law requires that new technology payments must be made in a budget neutral manner, any increased funding for new drugs or devices is made by reducing payments for all other inpatient hospital services.  Shifting money around within the inpatient PPS leaves hospitals without the additional money they need to ensure beneficiaries have access to the newest medical tests and treatments.  While the costs of these new treatments are significant and worthy of additional funding, the costs associated with all other inpatient procedures are not declining.  The AHA continues to support applying the special add-on payment adjustments narrowly, so that these are limited to new cutting edge, breakthrough technologies with significant cost implications.  The AHA will continue to urge Congress to devise an appropriate adjustment to hospital payments so that new technologies may be sufficiently reimbursed, without redistributing payments from elsewhere in the system.  

Drug-Eluting Stents

The use of drug-eluting stents is expected to be quickly and widely adopted by hospitals due to its promise to combat the problem of restenosis in the treatment of coronary artery disease.  In the FY 2003 inpatient PPS final rule, CMS created two new DRGs (DRG 526 and DRG 527) with enhanced payment rates for hospitals using the more costly drug-eluting stents.  However, changes to the DRG system are required to be made in a budget-neutral manner, such that the enhanced payment rate for drug-eluting stents resulted in a corresponding decrease in payment for all other hospital inpatient services.  These newly created DRGs were to be activated April 1, 2003, and available for use upon Food and Drug Administration (FDA) approval of the technology, which was achieved on April 24.  

The AHA believes that the payment system should adequately reflect the cost of new technologies.  While any miscalculations in payments will be adjusted over time through the existing DRG recalibration process, the AHA encourages CMS to consider the data it has received to date from hospital claims to determine whether the proposed FY 2004 payment rate for drug-eluting stents is adequate.  

Counting of Residents

The AHA opposes CMS’s proposed changes in how it will count residents, based on the negative effect this will have on residency programs in non-hospital settings.  In addition to the comments below, we also agree with the comments and recommendations submitted by the Association of American Medical Colleges.

Currently, hospitals may count, for the purposes of Medicare Indirect Medical Education (IME) and direct Graduate Medical Education (GME) payments, the time residents spend training in non-hospital sites if certain conditions are met, including the requirement that hospitals incur “all or substantially all” of the costs of training at the non-hospital site.  In the rule, CMS proposes that a hospital must continuously incur the direct GME costs of resident’s training in a particular program since the date the resident first began training at the site, so that the hospital can count the full-time equivalent resident.  This change goes against the intent of the Medicare statute governing the reimbursement for medical education.

When Congress passed the BBA, it broadened the scope of settings in which hospitals could train residents and still receive GME funding.  This flexibility is important and necessary for hospitals, given the increased trends toward outpatient care and the increased need for primary care programs in certain communities.  Furthermore, due to the workforce shortages, certain medical care and services may not be accessible to Medicare beneficiaries - especially in underserved populations - without this flexibility.   These proposed changes could have significant negative consequences on resident training.  The AHA questions the need for any revision to the current policy, and urges CMS to withdraw its proposed changes in the final rule.

According to the proposed rule, these changes would take effect October 1, 2003, yet confusion exists about the intended implementation date because of ambiguous preamble language.  Hospitals have budgeted for and have been operating under CMS’s current regulations.  Any changes made to graduate medical education reimbursement must be applied prospectively.    

Nursing and Allied Health Education Activities

The AHA opposes the elimination of cost based reimbursement of pharmacy residency programs.  

In the rule, CMS is proposing to “clarify” its policy regarding payments to hospitals for provider-operated nursing and allied health education programs.  Historically, Medicare has made reasonable cost payment to providers for its share of the costs that providers incur in connection with approved educational activities.  The agency is proposing to distinguish between continuing educational activities (such as educational workshops and seminars, or when a registered nurse receives training in a specialized skill or new technology) and approved educational programs (such as “programs of long duration” that result in “value added” skills where an individual is able “to perform in the specialty as a whole”).  The former would no longer be eligible for cost-based reimbursement.  CMS explicitly states that pharmacy residency programs do not meet the criteria for approval as a certified program, and thus, beginning October 1, 2003, pharmacy residency programs would no longer be reimbursed on a pass-through, reasonable cost basis, but as normal operating costs covered by the IPPS rate.

Pharmacy residency programs are approved educational programs.   According to current regulations, “CMS will consider an activity an approved nursing and allied health education program if the program is a planned program of study that is licensed by State law, or if licensing is not required, is accredited by the recognized national professional organization for the particular activity” (42 Federal Register 413.85(e)).  Pharmacy residency programs are accredited as post-graduate training programs by the American Society of Health-System Pharmacists (ASHSP), and the training results in “value-added skills” critical to patient care.  

There is extensive literature on the benefits of clinical pharmacists and their role in delivering high quality patient care.   Clinical pharmacists assist physicians in determining the most appropriate and cost-effective medication therapy that often results in decreased lengths of stay, reduced hospital readmissions, and improved medication safety.  The Institute of Medicine report To Err is Human: Building a Safer Health System indicated that because “the pharmacist has become an essential resource in modern hospital practice,” providers should ensure the availability of pharmacist decision support in the medication use process and include them during rounds of patient care units.  

Considering hospital vacancy rates for pharmacists exceed 10 percent, and the enhanced focused among hospitals to decrease medical errors and improve patient safety, now is not the time to eliminate funding to train pharmacists.   The need for well-trained clinical pharmacists is increasing, yet more and more pharmacy graduates are choosing positions in drug firms or retail pharmacies where the hours and pay are more desirable.  Residency training is one of the few mechanisms available to expose students to hospital positions.  Unfortunately given the financial challenges facing hospitals, the unjustified elimination of cost-based reimbursement likely would result in decreased residency positions and, potentially, the elimination of programs altogether.  

The AHA urges CMS to remove pharmacy residency programs from its definition of continuing educational activities and continue to consider them an approved educational program.

CAH Outpatient Clinical Diagnostic Laboratory Tests

The AHA strongly opposes CMS’s proposal to “clarify” that patients must be “physically present in a critical access hospital” when a laboratory specimen is collected in order for the hospital to continue to receive cost-based reimbursement.   Currently, Medicare regulations state that payment to a CAH for outpatient clinical diagnostic laboratory tests will be made on a reasonable cost basis if the individuals for whom the tests are performed are outpatients of the CAH at the time the specimen is collected.  Tests performed on all others are paid based on the laboratory fee schedule.  

This proposed revision is not a clarification of current policy, but rather an implicit change that is contrary to the spirit around the creation of the CAH program.  In 1997, Congress created the CAH program and granted cost-based reimbursement for Medicare inpatient and outpatient services to ensure that isolated rural communities have access to critical health care services.  It was Congress’ intent that CAHs be paid based on their costs, regardless of whether or not the patient was physically on site at the facility.  Because there are frequently few or no reasonable alternatives to care, CAHs often are the sole source of essential health care services for their communities.  Thus, CAHs often provide laboratory services to Medicare beneficiaries in other rural settings, such as rural health clinics (RHCs), skilled nursing facilities (SNFs), and patients’ homes.  This is especially important when the off-site services are provider-based and owned by the CAH.

Compromising the financial stability of CAHs by paying for laboratory testing on a fee schedule is not sound policy.   The additional Medicare spending necessary to ensure all CAH clinical laboratory services continue to receive cost reimbursement is minimal, and yet the dollars are incredibly important to CAHs that continue to struggle to survive.  

Finally, the change in policy would require Medicare beneficiaries to physically travel to a CAH to have laboratory specimens drawn.   Often alternative sites (such as RHCs, SNFs or a patient’s home) are over an hour away from the CAH.  This provides an additional burden on the frail elderly, and the additional time and expense incurred by the patient is unnecessary if the CAH is willing and able to draw a specimen at the point of patient care and transport it back to the CAH for analysis.  The elimination of cost-based reimbursement may make it prohibitive for CAHs to continue offering this service, which in turn could limit beneficiary access to a necessary service.  

The AHA strongly urges CMS to withdraw its proposal.  

DRG Changes

In general, the AHA supports CMS’s proposed changes to the DRG system, as the revisions appear rational given the data and information provided.

In the proposed rule, CMS indicated that it has evaluated whether additional DRGs should be split based on the presence or absence of comorbidities and complications to improve the clinical and cost cohesiveness of the DRG classification system.  The AHA supports CMS’s proposals to expand the number of DRGs related to spinal procedures, extracranial vascular procedures, and the removal of internal fixation devices.  We believe these improvements appear justified, especially as CMS awaits recommendations regarding the adoption of ICD-10 as the national uniform standard coding system for inpatient reporting.  

The AHA also strongly supports moving quickly and expeditiously to ICD-10-CM codes.  We believe that ICD-10-CM and ICD-10-PCS are an improvement over ICD-9 and it will provide greater specificity and detail.   ICD-9-CM is outdated and quickly running out of space, in both its available diagnosis and procedure codes.  It’s critical that ICD-10-CM replaces ICD-9-CM diagnosis codes and that ICD-10-PCS replace ICD-9-CM volume 3 procedure codes for hospital inpatient reporting in the near future.   We believe ICD-10-CM and ICD-10-PCS are a vast improvement over the ICD-9 system and that they will provide greater specificity and detail – a first step towards developing a refined system.

The AHA also supports the revision as proposed by CMS to DRGs 1, 2, 23, 478, 514.  We also agree with the changes proposed to major diagnostic categories (MDC) 8, 15 and 17 and 23.  We concur with your proposal to modify the Medicare Code Editor, and support the revision of the surgical hierarchies as proposed.  

For July 8, 2003 Technical Addendum in PDF format,  click here.


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