FDAnews Device Daily Bulletin


April 19, 2006

The Centers for Medicare and Medicaid Services (CMS) proposed sweeping changes in reimbursement rates for hospital inpatient procedures. The changes target reimbursement loopholes used by specialty hospitals and seek to trim the amount spent by the CMS on devices such as pacemakers.

When fully implemented, which is anticipated by 2008 or sooner, the revised Inpatient Prospective Payment System would improve the accuracy of payment rates for inpatient hospital stays by raising the weights assigned to Diagnosis Related Groups (DRGs) based on costs rather than charges, and adjusting the DRGs for patient severity, according to the CMS.

CMS officials say the proposed rule will mean that payments for hospital stays will "more accurately" reflect the costs of providing services.

The proposed changes reflect recommendations from the Medicare Payment Advisory Commission and respond to congressional concerns that the existing system may create incentives for certain hospitals to "cherry pick" more profitable cases, said CMS Administrator Mark McClellan.

The reimbursement cuts proposed are thought to run deep for some of the most lucrative heart products in the device sector, but proposed changes for orthopedic products such as replacement hips and knees are more moderate, according to published reports.

Devicemakers expressed great concern about a plan that bases future payments on historical costs, because they say the data that would be used to calculate rates does not accurately reflect the procedures and services available today and would penalize hospitals that use newer, more advanced technologies.

AdvaMed warned that the proposed changes in the rule make "broad-sweeping cuts that would have a disproportionately negative effect on patients receiving advanced medical treatments." AdvaMed supports a measured approach to refining inpatient hospital payments.

"Newer medical technologies are allowing patients to recover faster and often reduce overall medical and social costs," said Ann-Marie Lynch, AdvaMed executive vice president for payment and healthcare delivery.

To read the CMS report, visit http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/cms1488p.pdf (http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/cms1488p.pdf).

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