AdvaMed: Proposed IPPS Rule Fails to Solve Charge Compression

The Centers for Medicare & Medicaid Services' (CMS) proposed Inpatient Prospective Payment System (IPPS) rule for fiscal 2008 is "good news," but the final rule "needs to address the long-standing problem of charge compression," Stephen Ubl, president and CEO of AdvaMed, said.

The CMS issued the proposed rule April 13, saying it would improve the accuracy of Medicare payments under the IPPS. The revised system is intended to better recognize severity of illnesses when setting healthcare reimbursement amounts, according to a Merrill Lynch analyst report.

The proposed IPPS rule would replace the current 538 diagnosis-related groups (DRGs) with 745 new Medicare-severity (MS)-DRGs by splitting certain former DRG codes into two or three levels of severity, the report said.

DRGs are groups of medical conditions and are the basis for reimbursement of hospital services. However, within DRGs, not all patients require the same levels of care and services — therefore, some patients within a DRG are more expensive to treat than others. Splitting DRGs into severity levels is an attempt to account for these differences in expenses within the DRGs.

AdvaMed said the MS-DRGs maintain improvements to the DRG classification system; however, it is disappointed by the CMS' failure to address charge compression, which it said is a "systemic bias."

More information is available at: www.cms.hhs.gov/AcuteInpatientPPS/IPPS/list.asp#TopOfPage.