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CMS TEMPERS CHANGES TO INPATIENT PAYMENT SYSTEM

August 2, 2006

The Centers for Medicare & Medicaid Services (CMS) issued changes to Medicare's hospital inpatient payment system this week. The agency originally proposed the changes in April, but altered its proposal in response to industry and congressional comments.

The final changes to the Medicare payment system include less drastic payment cuts than the original April proposal.

AdvaMed President and CEO Stephen Ubl responded favorably. "At first blush it appears that the rule addresses many of the concerns that were raised by patient, physician and hospital groups," he said, adding that some of the improvements include:

A three-year phase-in for cost-based weights rather than full implementation in fiscal 2007;

Incremental changes to a limited number of diagnosis-related groups (DRGs) rather than broader changes to the entire DRG classification system; and

Changes in the methodology used to estimate costs.

"We look forward to working with the administration and CMS over the three-year phase-in period to further improve the accuracy of inpatient hospital payments," Ubl said.