EP Lab Digest Editor-in-Chief Dr. Todd Cohen and colleague Dennis Sheridan, MBA, CHE, address the proposed hospital inpatient payment system changes by CMS. Also included in this feature is an editorial from EP Lab Digest board member Linda Moulton, RN, MS.

       Earlier this year, the Centers for Medicare and Medicaid Services released its Fiscal Year (FY) 2007 Inpatient Proposed Rules for public comment. The proposed changes would affect both the current Diagnosis–Related Group Weighting Methodology and the Patient Classification System in the Inpatient Prospective Payment System. While the official period ended on June 12, it did not happen without significant response from the medical community at large, including just about every society involved with the provision of cardiac care. 
       The major reasons for the dramatic opposition to the proposed rules are threefold: 
       First, as detailed in the analysis provided by The Health Economics and Outcomes Research Institute of the Greater New York Hospital Association, the proposed reimbursement methodology for cardiac devices including AICDs, pacemakers, stents and cardiac valves, is flawed. Under CMS’ proposal (which was prematurely endorsed by both the Medicare Payment Advisory Commission [MedPAC] and the Chairman of the House Ways and Means Committee), the basis for reimbursement is the 2003 Cost Report data submitted by hospitals. Such data obviously does not and cannot account for new clinical trial data, procedures, and devices that have contributed to the treatment of heart disease since 2003. Instead, with a blind eye to these clinical advances in cardiovascular medicine, CMS has proposed reducing reimbursement by 25–32% (for a variety of medical devices), guided by the erroneous belief that hospitals have been marking up the actual acquisition cost of devices to the same extent. While the net affect across the Medicare System is intended to be budget neutral, the true impact of the proposal would shift dollars away from the surgical DRGs in specialties such as cardiac and orthopedics and move them to the medical DRGs for conditions such as pneumonia, septicemia, etc. If the proposal comes to fruition in its present form, it would rock the financial foundation of many hospitals that have heavily invested in the provision of tertiary and quaternary cardiac care. A glaring example of such lies in the projected combined loss of revenue exceeding $37M for the four hospitals on Long Island with cardiac surgery programs. 

CMS Proposed Hospital Inpatient Payment

-Linda Moulton, RN, MS Owner, Critical Care ED and C.C.E. Consulting Faculty, Order and Disorder Electrophysiology Training Program Springfield, Illinois **i**This year’s restructuring of the CMS hospital inpatient payment system seems to be undergoing criticism from many directions. A look at the proposed payment structure shows massive decreases in reimbursement for high-tech cardiology therapies on one hand and huge gains on the other end for a variety of other diagnostic categories. A very valid complaint about the proposed system is that decisions were being based on inpatient data that was up to five years old, and obviously before MADIT II and SCD-HeFT became the standard for care. It’s also interesting for cardiology to take such a hit when we are finally seeing some impact from all of our work on the cardiovascular disease rates. **i**Looking further into this, it seems that there are many possible areas of impact from these DRG changes. I’ve divided these into the following: patients, hospital caregivers, physicians, hospitals, support staff, and industry. **i**The impact for patients may be that they would not receive therapies they need due to lack of reimbursement to the hospitals. This comes on the heels of studies that have demonstrated the cost effectiveness of device implants and ablative procedures. As a result, the length of stay in hospitals may increase from use of less effective therapies, and ultimately, cost of care would increase. Quality of life would undoubtedly be impacted, and in some instances, mortality rates may increase. Poorer health may translate into a lesser productivity level for patients, and this would also have a cost. **i**Caregiving staff may be reduced on cardiovascular units due to less revenue to pay for salaries. In addition, those giving care would be further stretched and would be caring for patients who may now have higher acuity due to progressive heart failure and more symptomatic arrhythmic episodes. **i**Physicians may be told by hospitals to perform fewer procedures due to revenue loss, increasing the incidence of poor patient outcomes and potential litigations. Physicians, however, would no doubt be held to the same standard of care and be told to follow the same treatment guidelines. **i**Hospitals may place restraints on performance of procedures for which they would receive inadequate reimbursements, leading to a type of quota system. If they did not do this, they would fall further into debt or have to pass on the cost to other patients (all of us). The National Association of Urban Hospitals opposes the proposed system. These urban hospitals care for the higher acuity patients who are the recipients of advanced technologies, and urban hospitals would suffer most from the reduced payment scheme. The American Hospital Association has a more modified position and is opposing part of the change; they would like to see a postponement of changes for one year and a phase-in of payment changes over the next three years. **i**Support Staff: The Health Information Professionals believe the changes may require hospitals and care-providing organizations to retrain coding staff and upgrade coding and billing systems. These factors could have an impact on billing and cash flow for institutions. **i**Industry has been quite vocal in its protests. The disadvantages to industry are obvious. Partnership with industry has contributed to the amazing progress that has been achieved in device and catheter development in electrophysiology. The impact of these DRG changes may hamper further gains in research and development and lead to missed opportunities for catheter/device development. However, a possible offshoot of this proposed payment plan may be that device manufacturers would develop that Volkswagon device that would be half the cost for patients who are at high risk for sudden cardiac death but have no documented arrhythmic incidences. **i**This change to the DRG calculation method has stirred up almost as much controversy as the original DRG concept did when introduced over 20 years ago. The response at that time was that hiring freezes took place in many hospitals, and as a result, nursing school admission rates dropped. However, about two years later, there was another nursing shortage! The pendulum just swings back and forth. If the new payment system is initiated, I think we need to brace ourselves for a bumpy ride.

       Second, and closely related to the issues discussed above, is the fact that the proposed changes do not provide for severity adjustments within the DRGs, which are required to accommodate for the significant variability in Medicare reimbursement across the country. Those hospitals offering complex procedures, including the deployment of stents and/or the implant of devices, would experience a decrease in their reimbursement, while those facilities that do not perform these procedures would actually see an increase in reimbursement. Such a divergent reimbursement practice would only serve to further degrade an already fractionated healthcare delivery system, and could potentially hinder the delivery of appropriate care to an aging population who ultimately will drive up the cumulative cost of care over an individual’s life span. In general, this represents poorly constructed public policy, which runs counter-intuitive to the ground-breaking revelations of clinical trials such as MADIT II and SCD-HeFT. Put more simply, the government proposes a flawed approach using flawed data to in effect be penny-wise and pound foolish. 
       Finally, moving above the micro-minutia of the accounting and budgetary focus of the system, it becomes readily apparent that in its attempt to accomplish budget neutrality by capping the cost of technological advances in medicine, CMS has simply targeted the most significant disease process in the country. While that may appear at first glance to achieve the fiscal objective, it raises dramatic quality of life and ethical concerns. The problem is even more compounded by the fact that the proposed changes are slated to be implemented as of October 1, 2006. Regardless of the side of the debate on which one might fall, it is simply prudent to implement dramatic change slowly over time so as to make every effort to maintain the stability of the system for which change is earmarked. A one-year deferred implementation of the final ruling would be prudent but is not likely, given the mandate from Congress for CMS to provide a budget-neutral solution. 
       In summary, the CMS proposal would be a major step in the wrong direction — a step this country’s healthcare system cannot afford to take.