Proposed Medicare Payment Changes Draw Criticism

Hospitals, physicians and patient advocacy groups have voiced concerns over a proposal by the Bush administration to revise Medicare reimbursements to hospitals that would reduce payments by 20% to 30% for many complex procedures and new technologies, the New York Times reports (Pear, New York Times, 7/17).

CMS in April announced the proposal, which includes the closure of loopholes used by specialty hospitals and a plan to replace the current charge-based reimbursement system with a cost-based system. Under the proposal, the cost-based reimbursement system would take effect in October, and severity-adjusted reimbursements -- which would pay hospitals more for the treatment of sicker patients -- would take effect in October 2007.

The proposal would affect reimbursements for several inpatient procedures -- such as those that involve the implantation of stents, defibrillators and other medical devices (California Healthline, 7/14).

According to the Times, the proposal would:

• Reduce reimbursements for angioplasties and subsequent implantation of drug-coated stents by 33% to $7,590;
  
  
• Reduce reimbursements for implantation of defibrillators by 23% to $22,000; and
  
  
• Reduce reimbursements for hip and knee replacements by 10% to $14,500.

Some hospitals, physicians and patient advocacy groups have raised concerns that the proposal could have "devastating" effects, the Times reports.

Alan Guerci, president of St. Francis Hospital in New York, said the proposal would reduce Medicare reimbursements to the hospital by 12%, or $21 million, and would "significantly reduce payments for cardiac care and will force many hospitals to reduce the number of cardiac procedures they perform."

In addition, a coalition of advocacy groups that includes the Parkinson's Action Network and the Society for Women's Health Research in a recent letter to Bush administration officials wrote that the proposal "could have a devastating impact on payment for critical treatments for seriously ill patients." Some pharmaceutical and medical device companies, as well as more than 200 lawmakers, have called for a delay of the proposal.

HHS Secretary Mike Leavitt has said that the proposal would make the reimbursement system more accurate.

Some hospitals and lawmakers also have raised concerns about the decision by the Bush administration in July 2005 to award a "sole-source contract" to 3M Health Information Systems to determine whether Medicare could establish a reimbursement system based on company software. 3M has said that Medicare could establish such a reimbursement system.

Richard Anderson, CEO of 3M rival Ingenix, said that 3M had a conflict of interest.

Richard Averill, research director at 3M Health Information Systems, denied that the company had a conflict of interest, adding, "The contract required us to use the 3M system in our analysis. There was no evaluation of alternatives" (New York Times, 7/17).