Managed Care - May 2008 - (Page 29) MEDICARE’S BIG CHANGES Moving to a payment system tied to the severity of illness and refusing to pay for hospital-acquired conditions may encourage private payers to do the same By Martin Sipkoff Contributing Editor n Oct. 1, the Centers for Medicare & Medicaid Services is to initiate a notably altered way to pay hospitals. Its new system, Medicare Severity DRG (MS-DRG), is weighted by the severity of diagnosis, paying more for sicker patients. Some hospitals, such as those in urban areas treating a sicker-thanaverage population, will see an increase in Medicare payments. Others will see a drop. Most significantly, payment is now tied to the quality of care. Last year, CMS said it will no longer pay for eight conditions if they were not present on admission. On April 14, CMS proposed an expansion of that list, including nine more conditions, for final adoption later this year. Health plans are looking hard at all this. Starting this spring and summer, several are refusing to pay for hospital errors. Aetna and WellPoint, for example, are banning payments for care resulting from serious avoidable errors, such as operating on the wrong limb or giving a patient incompatible blood. “This value-based purchasing has been coming for some time,” says Fred Pane, senior director of pharmacy affairs at Premier, a hospital group-purchasing organization. “It is an important change that could affect all health care reimbursement over time.” Reform to address this flaw in the prospective system of payment began with the Deficit Reduction Act of 2005, which was a federal product of the marriage of quality and cost control that began in the early 1990s. The act’s stated purpose was to reduce overall hospital costs by improving care: Congress ordered CMS to select at least two conditions that the agency considered costly or too frequent, that resulted in the assignment of patients to a higher-paying DRG when they have that condition as a secondary diagnosis after admission, and that could have been prevented through adherence to evidence-based guidelines. In March 2007, Rand Health produced a detailed evaluation of the current system and the changes proposed by CMS to meet the demands of the Deficit Reduction Act. It said that the purpose of what it called refinements in the CMS payment system is “to improve payment accuracy and equity so that hospitals do not avoid treating expensive cases” or have the advantage of treating less costly conditions. “The refinements would reduce payments for less expensive cases and increase payments for more expensive cases.” In a November 2007 report to Congress, the Department of Health and Human Services moved that idea a step further by stating that “value-based purchasing, which links payment to performance, is a key policy mechanism that CMS is proposing to transform Medicare from a passive payer of claims to an active purchaser of care.” O Starts in October “Accountability is always highly effective,” says Babette Apland, senior vice president and health care manager for HealthPartners, a Minnesota health plan. “In our experience, providers agree with that idea.” The changes apply to more than 3,500 hospitals paid under the Inpatient Prospective Payment System (IPPS). It is effective for discharges on or after Oct. 1, 2008. “The rule continues the transformation of the Medicare program to a prudent purchaser of services by proposing a number of payment policies that are more accurate and by strengthening incentives for hospitals to improve the quality of care they furnish to beneficiaries,” says CMS spokeswoman Ellen Griffith-Cohen. Aetna has taken the position that MS-DRG can improve care and lower costs. The company, the third-largest by enrollment, has begun stipulating MAY 2008 / MANAGED CARE 29
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